UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549










FORM 20-F










(Mark One)



| |  ̈ | REGISTRATION STATEMENT
                                                                                                         PURSUANT TO SECTION 12(b)
                                                                                                         OR (g) OF THE SECURITIES
                                                                                                         EXCHANGE ACT OF 1934
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



OR



| | þ | ANNUAL REPORT
                                                                                                           PURSUANT TO SECTION
                                                                                                           13 OR 15(d) OF THE
                                                                                                           SECURITIES EXCHANGE
                                                                                                           ACT OF 1934
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For the fiscal year ended December 31,
2012



OR



| |  ̈ | TRANSITION REPORT
                                                                                                         PURSUANT TO SECTION 13
                                                                                                         OR 15(d) OF THE SECURITIES
                                                                                                         EXCHANGE ACT OF 1934
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



OR



| |  ̈ | SHELL COMPANY
                                                                                                         REPORT PURSUANT TO SECTION
                                                                                                         13 OR 15(d) OF THE SECURITIES
                                                                                                         EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Commission file number: 001-33750



Maxcom Telecomunicaciones, S.A.B. de
C.V.

(Exact name of Registrant as specified
in its charter)










Maxcom Telecommunications, Limited Liability
Public Stock Corporation

(Translation of Registrant’s name
into English)










United Mexican States

(Jurisdiction of incorporation or organization)










C. Guillermo González Camarena No.
2000

Col. Centro de Ciudad Santa Fe

Mexico, D.F., 01210

(Address of principal executive offices)










Manuel Salvador Pérez Alavez

Investor Relations

Tel. + (52) 55 4770-1170

Fax. + (52) 55 5147-3820

manuel.perez@maxcom.com

Maxcom Telecomunicaciones, S.A.B. de C.V.

C. Guillermo González Camarena No.
2000

Col. Centro de Ciudad Santa Fe

Mexico, D.F., 01210



(Name, Telephone, E-mail and/or Facsimile
number and Address of Company ContactPerson)



Securities registered or to be registered
pursuant to Section 12(b) of the Act:



American Depositary Shares (“ADSs”),
each representing seven (7) Ordinary Participation Certificates

(Certificados de Participación
Ordinarios) (“CPOs”), each CPO representing three (3) Series A

Common Stock, without par value, registered
with the New York Stock Exchange Euronext



Securities registered or to be registered
pursuant to Section 12(g) of the Act:

None



Securities for which there is a reporting
obligation pursuant to Section 15(d)of the Act:

11% Senior Notes due 2014, not registered
on an exchange

(Title of Class)










Indicate the number of outstanding shares
of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:806,006,544
shares of Series A common stock. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes  ̈ No þ



If this report is an annual or transition
report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. Yes  ̈ No þ



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes þ No  ̈



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files) Yes  ̈No  ̈ N/A þ



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and
large accelerated filer” in Rule 12b-2 of the Exchange Act.



| ̈Large accelerated filer |  ̈Accelerated filer | þNon-accelerated filer
|------------------------ | ------------------ | ----------------------



Indicate by check mark which basis of
accounting the registrant has used to prepare the financial statements included in this filing:



| ̈U.S. GAAP | þInternational Financial Reporting Standards as        |  ̈Other
|---------- | ------------------------------------------------------ | ------
|           | issued by the International Accounting Standards Board |       



If “Other” has been checked
in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
Item 17  ̈ Item 18 þ



If this is an annual report, indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes  ̈No þ
















TABLE OF CONTENTS



|PART I                                                        |                                                         |    | 6 
|------------------------------------------------------------- | ------------------------------------------------------- | -- | --
|ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |                                                         | 6 
|ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE               |                                                         | 6 
|ITEM 3. KEY INFORMATION                                       |                                                         | 6 
|A.                                                            | Selected financial data                                 |    | 6 
|B.                                                            | Capitalization and indebtedness                         |    | 9 
|C.                                                            | Reasons for the offer and use of proceeds               |    | 9 
|D.                                                            | Risk factors                                            |    | 9 
|ITEM 4. INFORMATION ON THE COMPANY                            |                                                         | 29
|A.                                                            | History and development of the Company                  |    | 29
|B.                                                            | Business overview                                       |    | 30
|C.                                                            | Organizational structure                                |    | 61
|D.                                                            | Property, plant and equipment                           |    | 62
|ITEM 4A. UNRESOLVED STAFF COMMENTS                            |                                                         | 66
|ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS          |                                                         | 66
|A.                                                            | Operating Results                                       |    | 67
|B.                                                            | Liquidity and capital resources                         |    | 77
|C.                                                            | Research and development, patents and licenses, etc.    |    | 82
|D.                                                            | Trend information                                       |    | 83
|E.                                                            | Off — balance sheet arrangements                        |    | 83
|F.                                                            | Tabular disclosure of contractual obligations           |    | 83
|G.                                                            | Safe Harbor                                             |    | 84
|ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES            |                                                         | 84
|A.                                                            | Directors and senior management                         |    | 84
|B.                                                            | Compensation                                            |    | 87
|C.                                                            | Board practices                                         |    | 89
|D.                                                            | Employees                                               |    | 91
|E.                                                            | Share ownership                                         |    | 91
|ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS     |                                                         | 91
|A.                                                            | Major Shareholders                                      |    | 91
|B.                                                            | Related party transactions                              |    | 93
|C.                                                            | Interests of experts and counsel                        |    | 93
|ITEM 8. FINANCIAL INFORMATION                                 |                                                         | 94
|A.                                                            | Consolidated statements and other financial information |    | 94
|B.                                                            | Significant changes                                     |    | 94
|ITEM 9. THE OFFER AND LISTING                                 |                                                         | 94



2







|ITEM 10. ADDITIONAL INFORMATION                                                           |                                        | 97 
|----------------------------------------------------------------------------------------- | -------------------------------------- | ---
|A.                                                                                        | Share capital                          |    
|B.                                                                                        | Memorandum and articles of association |    
|C.                                                                                        | Material contracts                     |    
|D.                                                                                        | Exchange Controls                      |    
|E.                                                                                        | Taxation                               |    
|F.                                                                                        | Dividends and paying agents            |    
|G.                                                                                        | Statement by experts                   |    
|H.                                                                                        | Documents on display                   |    
|I.                                                                                        | Subsidiary information                 |    
|ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                       |                                        | 130
|ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                           |                                        | 131
|A.                                                                                        | Debt Securities                        |    
|B.                                                                                        | Warrants and Rights                    |    
|C.                                                                                        | Other Securities                       |    
|D.                                                                                        | American Depositary Shares             |    
|PART II                                                                                   |                                        |    
|ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                                  |                                        | 132
|ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
    OF PROCEEDS |                                        | 132
|ITEM 15. CONTROLS AND PROCEDURES                                                          |                                        | 133
|ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT                                                |                                        | 134
|ITEM 16B. CODE OF ETHICS                                                                  |                                        | 134
|ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                          |                                        | 134
|ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                      |                                        | 134
|ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS           |                                        | 135
|ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT                                    |                                        | 136
|ITEM 16G. CORPORATE GOVERNANCE                                                            |                                        | 136
|PART III                                                                                  |                                        | 139
|ITEM 17. FINANCIAL STATEMENTS                                                             |                                        | 139
|ITEM 18. FINANCIAL STATEMENTS                                                             |                                        | 139
|ITEM 19. EXHIBITS                                                                         |                                        | 140
|GLOSSARY OF TELECOMMUNICATIONS TERMS                                                      |                                        | 145



3







PRESENTATION OF FINANCIAL INFORMATION
AND OTHER DATA



Unless otherwise specified,
all references to “U.S. dollars,” “dollars,” “U.S.$” or “$” are to United States
dollars and references to “Ps.” and “pesos” are to Mexican pesos. Unless otherwise specified, our financial
data for the years ended December 31, 2012 and 2011 is presented in thousands of nominal Mexican pesos. Amounts presented in this
annual report may not add up or may be slightly inconsistent due to rounding.



Unless otherwise provided,
this annual report contains translations of peso amounts into U.S. dollars solely for the convenience of the reader based on the
exchange rate reported by the Banco de México (Central Bank of Mexico) as its buying rate for pesos at December 31, 2012,
which was Ps.13.01 per U.S.$1.00. The currency conversions should not be construed as representations that the peso amounts actually
represent such dollar amounts. Additionally, these conversions should not be construed as representations that these peso amounts
have been or could have been converted into U.S. dollars at those or any other rates of exchange. For more information on exchange
rates, see “Item 3. Key Information — Selected Financial Data — Exchange Rates.”



Beginning with the
fiscal year starting January 1, 2012, Mexican issuers that disclose information through the Bolsa Mexicana de Valores,
S.A.B. de C.V. (the Mexican Stock Exchange, which we refer to as the BMV) are required to prepare financial statements in
accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. We refer
in this document to “International Financial Reporting Standards as issued by the International Accounting Standards Board”
as IFRS. In addition, these financial statements must be audited in accordance with the International Standards on Auditing, as
required by the Comisión Nacional Bancaria y de Valores (National Banking and Securities Commission, which we refer
to as the CNBV), and in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) (United States)
for purposes of filings with the U.S. Securities and Exchange Commission, or SEC.



Our consolidated financial
statements for the years ended December 31, 2012 and 2011 were prepared in accordance with IFRS. Our date of transition to
IFRS was January 1, 2011. These consolidated financial statements are our first financial statements prepared in accordance
with IFRS. IFRS 1, “First-time Adoption of International Financial Reporting Standards,” (IFRS 1) has been applied
in preparing these financial statements. Note 22 to our consolidated financial statements contains an analysis of the valuation,
presentation and disclosure effects of adopting IFRS and a reconciliation between Normas de Información Financiera Mexicanas(Mexican Financial Reporting Standards, or MFRS) and IFRS as of January 1 and December 31, 2011 and for the year
ended December 31, 2011. The selected financial information for 2011 differs from the information we previously published
for 2011, because it is presented in accordance with IFRS for comparative purposes, as required by IFRS 1.



SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS



This annual report
contains forward-looking statements. Statements that are not statements of historical fact, including statements about our beliefs
and expectations are forward-looking statements. The words “anticipates,” “believes,” “estimates,”
“expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,”
“targets,” “will,” “could,” “may,” “should” and similar words are
intended to identify these statements, which necessarily involve known and unknown risks and uncertainties. Accordingly, our actual
results of operations may be different from our current expectations and the reader should not place undue reliance on these forward-looking
statements. Forward-looking statements speak only as of the date they are made and we do not undertake any obligation to update
them in light of new information or future developments.



These statements are
based on management’s assumptions and beliefs in light of the information currently available to it. These assumptions also
involve risks and uncertainties which may cause the actual results, performance or achievements to be materially different from
any future results, performance or achievements expressed or implied by such forward-looking statements. Potential risks and uncertainties
include, without limitation:



4







| | · | competition
                                                                                                               in local services,
                                                                                                               data, Internet
                                                                                                               and Voice over
                                                                                                               Internet Protocol
                                                                                                               services;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our
                                                                                                               ability to service
                                                                                                               our debt;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | limitations
                                                                                                               on our access to
                                                                                                               sources of financing
                                                                                                               on competitive
                                                                                                               terms;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | significant
                                                                                                               economic or political
                                                                                                               developments in
                                                                                                               Mexico and the
                                                                                                               U.S.;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | changes
                                                                                                               in our regulatory
                                                                                                               environment, particularly
                                                                                                               developments affecting
                                                                                                               the regulation
                                                                                                               of the telecommunications
                                                                                                               industry;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our
                                                                                                               need for substantial
                                                                                                               capital;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | general
                                                                                                               economic conditions,
                                                                                                               including the economic
                                                                                                               slow-down in the
                                                                                                               U.S. and Mexico,
                                                                                                               due to the global
                                                                                                               financial crisis;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               global telecommunications
                                                                                                               downturn;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our
                                                                                                               ability to service
                                                                                                               our debt;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | performance
                                                                                                               of financial markets
                                                                                                               and thus our ability
                                                                                                               to refinance our
                                                                                                               financial obligations
                                                                                                               when they come
                                                                                                               due;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our
                                                                                                               history of operating
                                                                                                               losses;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               risks associated
                                                                                                               with our ability
                                                                                                               to implement our
                                                                                                               strategy;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | customer
                                                                                                               attrition;
| | - | ----------------------------------------------------------------------------------------------------------------------------------



| | · | technological
                                                                                                               innovations;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



| | · | currency
                                                                                                               fluctuations and
                                                                                                               inflation in Mexico;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | currency
                                                                                                               exchange rates,
                                                                                                               including the Mexican
                                                                                                               Peso — U.S.
                                                                                                               dollar exchange
                                                                                                               rate;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | changes
                                                                                                               in the policies
                                                                                                               of central banks
                                                                                                               and/or foreign
                                                                                                               governments; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               risk factors discussed
                                                                                                               under “Risk
                                                                                                               Factors.”
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As used in this Form
20-F, unless the context otherwise indicates, the terms “we,” “us,” “our,” or similar expressions,
as well as references to “Maxcom,” mean Maxcom Telecomunicaciones, S.A.B. de C.V. and its consolidated subsidiaries.
Please refer to the glossary of telecommunications terms included in the back of this Form 20-F.



We will provide without
charge to each person to whom this report is delivered, upon written or oral request, a copy of any or all of the documents incorporated
by reference into this annual report (other than exhibits, unless such exhibits are specifically incorporated by reference in
such documents). Written requests for such copies should be directed to Maxcom Telecomunicaciones, S.A.B. de C.V., Guillermo González
Camarena No. 2000, Colonia Centro de Ciudad Santa Fe, Mexico, D.F. 01210, attention: Investor Relations. Telephone requests may
be directed to 011-52-55-4770-1170.



5







PART
I



ITEM 1. IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS



Not applicable.



ITEM 2. OFFER STATISTICS
AND EXPECTED TIMETABLE



Not applicable.



ITEM 3. KEY INFORMATION



| | A. | Selected financial data
| | -- | -----------------------



The selected financial data set forth below
as of and for the years ended December 31, 2012 and 2011 have been derived from, and should be read in conjunction with,
our consolidated financial statements for the years ended December 31, 2012 and 2011, which are included in Item 18
of this report. Our consolidated financial statements for each of the two fiscal years ended December 31, 2012 were audited
by KPMG Cárdenas Dosal, S.C., an independent registered public accounting firm.



|                                             |  | For the Year Ended December 31, |        
|-------------------------------------------- |  | ------------------------------- | -------
|                                             |  | 2012(1)                         |        
|                                             |  | (U.S.$)                         |        
|                                             |  | (in thousands)                  |        
|Statement of comprehensive loss Data:        |  |                                 |        
|Net revenues                                 |  |                                 | 169,196
|Operating costs and expenses:                |  |                                 |        
|Network operating costs                      |  |                                 | 62,420 
|Selling, general and administrative expenses |  |                                 | 53,774 
|Depreciation and amortization                |  |                                 | 44,317 
|Other expenses                               |  |                                 | 13,165 
|Restructuring charges                        |  |                                 | 453    
|Total operating costs and expenses           |  |                                 | 174,129
|Operating (loss) income                      |  |                                 | (4,933 
|Interest expense                             |  |                                 | (23,131
|Interest income                              |  |                                 | 444    
|Foreign currency (gain) loss                 |  |                                 | 14,641 
|Derivative financial instruments (loss) gain |  |                                 | (3,805 
|Gain on repurchase of senior notes           |  |                                 | 7,521  
|Net finance cost                             |  |                                 | (4,332 
|Total income tax expense (loss)              |  |                                 | 1,196  
|Net loss and comprehensive loss for the year |  |                                 | (10,461
|                                             |  |                                 |        
|Loss and comprehensive loss per share:       |  |                                 |        
|Basic                                        |  |                                 | (0.01  
|Diluted                                      |  |                                 | (0.01  



6







|                                                         |  | For the Year Ended December 31, |         
|-------------------------------------------------------- |  | ------------------------------- | --------
|                                                         |  | 2012(1)                         |         
|                                                         |  | (U.S.$)                         |         
|                                                         |  | (in thousands)                  |         
|Statement of financial position Data                     |  |                                 |         
|                                                         |  |                                 |         
|Assets                                                   |  |                                 |         
|Current assets:                                          |  |                                 |         
|Cash and cash equivalents                                |  | $                               | 11,262  
|Derivative financial instruments                         |  |                                 | 1,259   
|Accounts receivables— net                                |  |                                 | 47,246  
|Value added tax recoverable                              |  |                                 | 3,818   
|Other sundry debtors                                     |  |                                 | 5,594   
|Inventory — net                                          |  |                                 | 1,346   
|Prepaid expenses                                         |  |                                 | 1,233   
|Total current assets                                     |  |                                 | 71,758  
|                                                         |  |                                 |         
|Non-current assets:                                      |  |                                 |         
|Telephone network systems and equipment — net            |  |                                 | 299,171 
|Intangible assets — net                                  |  |                                 | 10,478  
|Deferred income taxes — net                              |  |                                 | 753     
|Prepaid expenses                                         |  |                                 | -       
|Guaranty deposits                                        |  |                                 | 597     
|Derivative financial instruments                         |  |                                 | 1,211   
|Other assets                                             |  |                                 | 165     
|Total long lived assets                                  |  |                                 | 312,376 
|                                                         |  |                                 |         
|Total assets                                             |  | $                               | 384,134 
|                                                         |  |                                 |         
|Liabilities and Stockholders’ Equity                     |  |                                 |         
|Current liabilities:                                     |  |                                 |         
|Accounts payable                                         |  | $                               | 31,247  
|Accruals                                                 |  |                                 | 2,133   
|Current installments of obligations under capital leases |  |                                 | 422     
|Customer deposits                                        |  |                                 | 165     
|Other taxes payable                                      |  |                                 | 1,998   
|Accrued interests                                        |  |                                 | 916     
|Total current liabilities                                |  |                                 | 36,882  
|                                                         |  |                                 |         
|Non-current liabilities:                                 |  |                                 |         
|Derivative financial instruments                         |  |                                 | -       
|Senior notes                                             |  |                                 | 175,462 
|Installments of obligations under capital leases         |  |                                 | 398     
|Other accounts payable                                   |  |                                 | 2,380   
|Labor obligations upon retirement                        |  |                                 | 323     
|Other long term liabilities                              |  |                                 | 2,255   
|Deferred income taxes — net                              |  |                                 | -       
|Total long-term liabilities                              |  |                                 | 180,817 
|                                                         |  |                                 |         
|Total liabilities                                        |  |                                 | 217,699 
|                                                         |  |                                 |         
|Stockholders’ equity:                                    |  |                                 |         
|Capital stock                                            |  |                                 | 370,053 
|Additional paid-in capital                               |  |                                 | 276     
|Accumulated losses                                       |  |                                 | (203,895
|Repurchase of shares                                     |  |                                 | -       
|Total stockholders’ equity                               |  |                                 | 166,434 
|                                                         |  |                                 |         
|Total liabilities and stockholders’ equity               |  | $                               | 384,134 



7







|                                            |  | For the Year Ended December 31, |        
|------------------------------------------- |  | ------------------------------- | -------
|                                            |  | 2012(1)                         |        
|                                            |  | (U.S.$)                         |        
|                                            |  | (in thousands)                  |        
|Other Operational and Financial Data        |  |                                 |        
|Capital expenditures (2)                    |  |                                 | (44,842
|Resources arising from operating activities |  |                                 | 59,373 
|Resources used in financing activities      |  |                                 | (33,926
|Resources used in investing activities      |  |                                 | (44,666
|Adjusted EBITDA(3)                          |  |                                 | 53,257 
|EBITDA(3)                                   |  |                                 | 53,002 










| | (1) | Peso amounts were converted to
                                                                 U.S. dollars at the exchange rate of Ps.13.0101 per US$1.00 reported
                                                                 by the Banco de Mexico as its buying rate for pesos on December
                                                                 31, 2012. Such conversions are for the convenience of the reader
                                                                 and should not be construed as representations that the peso
                                                                 amounts actually represent such U.S. dollar amounts or could
                                                                 be converted into U.S. dollars at the rate indicated, or at any
                                                                 other rate.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Capital expenditures are presented
                                                                 according to the statement of cash flows and only include acquisitions.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | EBITDA for any period is defined
                                                                 as consolidated net income (loss) excluding depreciation and
                                                                 amortization, net finance cost, other (income) expenses and tax.
                                                                 Adjusted EBITDA for any period is defined as consolidated net
                                                                 income (loss) excluding depreciation and amortization, net finance
                                                                 cost, other (income) expenses, tax and stock option plan cost.
                                                                 EBITDA and adjusted EBITDA should not be considered as alternate
                                                                 measures of net income or operating income, as determined on
                                                                 a consolidated basis using amounts derived from statements of
                                                                 operations prepared in accordance with IFRS, or as indicators
                                                                 of operating performance or cash flows from operating activity
                                                                 as measures of liquidity. The following table sets forth a reconciliation
                                                                 of EBITDA to net income (loss) under IFRS for each of the periods
                                                                 presented.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                              |  | For the Year Ended December 31, |         
|----------------------------- |  | ------------------------------- | --------
|                              |  | 2012                            |         
|                              |  | (Ps.)                           |         
|                              |  | (in thousands)                  |         
|EBITDA Reconciliation         |  |                                 |         
|Net loss)                     |  |                                 | (136,088
|Total income taxes            |  |                                 | 15,560  
|Restructuring                 |  |                                 | 5,899   
|Other  expenses               |  |                                 | 171,279 
|Net finance cost              |  |                                 | 56,340  
|Depreciation and amortization |  |                                 | 576,565 
|EBITDA                        |  |                                 | 689,555 



8







EXCHANGE RATES



The following table sets forth, for the
periods indicated, the period-end, average, high and low buying rates, in each case for the purchase of U.S. dollars, all expressed
in nominal pesos per U.S. dollar. The buying rate on May 13, 2013 was Ps.11.98 per U.S.$1.00.



|              |  | Buying
    Rate(1) |      
|------------- |  | ------------------ | -----
|              |  | Period
    End     |      
|              |  |                    |      
|April 2013    |  | Ps.                | 12.16
|March 2013    |  |                    | 12.35
|February 2013 |  |                    | 12.87
|January 2013  |  |                    | 12.71
|December 2012 |  |                    | 13.01
|November 2012 |  |                    | 13.04
|October 2012  |  |                    | 13.09
|2012          |  |                    | 13.01
|2011          |  |                    | 13.99
|2010          |  |                    | 12.36
|2009          |  |                    | 13.06
|2008          |  |                    | 13.54










| | (1) | Source: Banco de México.
| | --- | ------------------------

| | (2) | Represents the average rates for each period indicated, calculated
                                                            by using the average of the exchange rates on the last day of each
                                                            month during the period.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our inclusion of these
exchange ratios is not meant to suggest that the peso amounts actually represent such U.S. dollars or that such amounts could
have been converted into U.S. dollars at such rate or any other rate.



| | B. | Capitalization and indebtedness
| | -- | -------------------------------



Not applicable.



| | C. | Reasons for the offer and use of proceeds
| | -- | -----------------------------------------



Not applicable.



| | D. | Risk factors
| | -- | ------------



Risks Related to Our Business



Because we have
a history of losses and may continue to incur significant expenses, we may not be able to generate sufficient cash flows to meet
our debt service obligations and implement our business plan.



We have had a history
of negative operating cash flows and could face difficulties in meeting our debt service obligations. We incurred losses of Ps.136.1
million (U.S.$10.5million) for the year ended December 31, 2012 as compared to losses of Ps.513.1 million (U.S.$36.7 million)
for the year ended December 31, 2011.



The losses for the
year ended December 31, 2012 are mainly related to lower operating income primarily due to a decrease in our wholesale and public
telephony business when compared to the year ended December 31, 2011, a decline which we expect to continue.



In addition, our business
plan, which contemplates the expansion of our network and services, requires significant capital expenditures. Our ability to
fund our debt service obligations, our operating expenses, and any planned capital expenditures will depend on our ability to
retain our existing customer base, develop a significantly larger customer base and increase our operating cash flows.



9







However, we may not
succeed in retaining existing customers and attracting more customers and as a result our business may not generate sufficient
operating cash flows to meet our existing debt service obligations or implement our business plan.



In the event we continue
to incur significant losses, we may not be able to service all of our debt obligations or fund our capital expenditure plan which
could have a material adverse effect on our business, results of operations and financial condition. If we cannot service our
debt obligations, we may have to take actions such as selling assets, seeking additional equity investments, reducing or delaying
capital expenditures, strategic acquisitions, investments and alliances, or restructuring our indebtedness pursuant to in court
or out of court procedures, any of which could materially harm our business, results of operations and financial condition.



We are experiencing low and declining
cash balances and increases in our trade accounts payable and other current liabilities, which may result in our not having sufficient
cash to meet our debt service obligations and operating expenses.



We have low cash balances
that have been declining. As of December 31, 2012, our cash and temporary investment balance was Ps.146.5 million (U.S.$11.3 million).
In addition, our trade accounts payable and other current liabilities have increased significantly since December 31, 2012, due
in part to our need to rely on vendor financing in order to preserve cash for the U.S.$11.0 million interest payment we made on
the notes due 2014 on December 15, 2012. If our trade accounts payable and other current liabilities continue to increase and
our cash balances continue to decline, and if we are not able to increase our cash reserves through capital contributions, through
asset sales or through the generation of increased operating cash flows, we may not be able to meet our debt service obligations
under the notes due 2014 and our other liabilities and operating expenses. In addition, due to our low cash balance, we are currently
not able to make the investments necessary to maintain our network.



We may be unable to maintain or expand
our network in a timely manner or without undue cost.



Our ability to achieve
our strategic objectives will depend in large part upon the successful, timely and cost effective expansion of our network. Factors
that could affect such build-out include:



| | · | municipal or
                                                                                                             regional political
                                                                                                             events or local rulings;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our ability to
                                                                                                             obtain permits to
                                                                                                             use public rights
                                                                                                             of way;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | state municipal
                                                                                                             elections and change
                                                                                                             of local government
                                                                                                             administration;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our ability to
                                                                                                             generate cash flow
                                                                                                             or to obtain future
                                                                                                             financing necessary
                                                                                                             for such build-out;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | unforeseen delays,
                                                                                                             costs or impediments
                                                                                                             relating to the granting
                                                                                                             of municipal and
                                                                                                             state permits for
                                                                                                             our build-out;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | delays or disruptions
                                                                                                             resulting from physical
                                                                                                             damage, power loss,
                                                                                                             defective equipment
                                                                                                             or the failure of
                                                                                                             third party suppliers
                                                                                                             or contractors to
                                                                                                             meet their obligations
                                                                                                             in a timely and cost−effective
                                                                                                             manner; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | regulatory
                                                                                                             and political risks
                                                                                                             relating to Mexico,
                                                                                                             such as the revocation
                                                                                                             or termination of
                                                                                                             our concessions,
                                                                                                             the temporary seizure
                                                                                                             or permanent expropriation
                                                                                                             of assets, import
                                                                                                             and export controls,
                                                                                                             political instability,
                                                                                                             changes in the regulation
                                                                                                             of telecommunications
                                                                                                             and any future restrictions
                                                                                                             or easing of restrictions
                                                                                                             on the repatriation
                                                                                                             of profits or on
                                                                                                             foreign investment.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Although we believe
that our cost estimates and expansion schedule are reasonable, we cannot assure you that the actual construction costs or time
required to complete the build-out will not substantially exceed our current estimates. Any significant cost overrun or delay
could hinder or prevent the successful implementation of our business plan, including the development of a significantly larger
customer base, and result in revenues and net income being less than expected.



10







The loss of
our key personnel or if we are unable to integrate new personnel in connection with the Recapitalization Transactions, could harm
our business, results of operations and financial condition.



Our operations are
managed by a small number of executive officers and key management personnel. Our continued success, including our ability to
effectively expand our network, provide existing services and develop and introduce new services, largely depends on the efforts
and abilities of our executive officers and other key management employees, as well as our ability to hire and retain highly skilled
and qualified management personnel.



The competition for
highly qualified management personnel in the telecommunications industry is intense and, accordingly, we cannot assure you that
we will be able to hire or retain the necessary management personnel.



Between 2008 and 2012,
we experienced significant turnover in our executive ranks, including in the positions of chief executive officer, chief operating
officer, chief sales officer and chief financial officer, which adversely affected our ability to develop and execute our business
strategies during such period.



We may not have
sufficient personnel to effectively manage and grow our operations.



We are experiencing
a significant strain on our administrative, operational and financial personnel. We anticipate that maintaining our operations
and pursuing sustainable growth will require us to recruit and hire a significant number of new non−executive managerial,
finance, sales and marketing, accounting and support personnel. If we are unable to attract and retain qualified personnel who
can support the implementation of our business plan, the quality of our services may be impaired, we may face difficulties in
retaining customers, and may be unable to grow our operations as planned.



If we have to
pay Telmex local interconnection fees, we may not be able to provide services at competitive rates.



Teléfonos de
México, S.A.B. de C.V. (which we refer to as Telmex), and its affiliates exert significant influence on all aspects of
the telecommunications market in Mexico, including interconnection agreements for local and long−distance services. We use
Telmex’s network for call termination to service virtually all of our customers’ calls to Telmex’s customers.
Our current local interconnection agreement with Telmex incorporates a “bill and keep” procedure under which we do
not pay Telmex an interconnection fee unless we exceed a certain level of traffic imbalance. Under the “bill and keep”
arrangement, if the imbalance between calls originated by Telmex and terminated by us and calls originated by us and terminated
by Telmex during a month does not exceed 5%, excluding commercial traffic and customers who have had contracts for less than 180
days, then no interconnection fee amounts are payable by the net carrier of interconnection services. The interconnection rate
is currently Ps.0.1268 (U.S.$0.00975) per minute. If the allowed percentage for imbalance of traffic for the “bill and keep”
procedure is exceeded and/or if the “bill and keep” procedure is eliminated and we have to pay Telmex for local interconnection,
our operating costs may increase and we may not be able to offer services at competitive rates.



Our results
may be negatively impacted by high levels of churn or decreased revenues from existing customers resulting from efforts to limit
churn rates.



We historically have
experienced customer attrition, which we refer to as churn. Churn results in the loss of future revenue from lost customers as
well as the inability to recover the costs incurred to acquire those customers, such as installation costs and commissions. Churn
occurs for several reasons which include disconnection of a customer for non−payment, disconnection of a customer who switches
to a competing company and disconnection of a customer who requests termination of service. Our average monthly churn rate for
the last three years has been 2.23%. Our churn rates for the year ended December 31, 2012 was 2.2%. An increase in customer churn
could have a material adverse impact on our revenue growth and in our results of operations, even if we could replace the customer
deactivated with a new customer. Churn may be impacted by:



| | · | customer delinquency;
| | - | ---------------------



11







| | · | our limited coverage
                                                                                                             area that restricts
                                                                                                             our ability to continue
                                                                                                             providing service
                                                                                                             when a customer moves;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our failure to
                                                                                                             meet service levels
                                                                                                             required by our customers;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | a decline in
                                                                                                             national or international
                                                                                                             economic conditions
                                                                                                             (in particular conditions
                                                                                                             that can affect our
                                                                                                             residential customers);
                                                                                                             and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | promotional and
                                                                                                             pricing strategies
                                                                                                             of our competitors.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, we may
experience decreased revenues from existing customers due to our efforts to limit churn rates, such as by offering promotional
pricing to maintain existing customers that might otherwise switch carriers or cancel particular services. High levels of churn
or decreased revenues as a result of our efforts to combat churn may have a material adverse effect on our financial condition
and results of operations.



Rapid technological
advances may require us to make significant capital expenditures to maintain and improve the competitiveness of our service offerings.



The telecommunications
industry is subject to rapid and significant changes in technology and requires the introduction of new products and services.
Like other operators, we cannot predict the effect of technological changes on our business. New services and technological advances
may offer additional opportunities for competitors to compete against us on the basis of cost, quality or functionality. In prior
years, we were working on installing what we believe to be a technologically advanced fiber optic network with a microwave overlay,
however, we cannot assure you that this technology will not be challenged by competition from new or improved digital or other
technologies in the near future. In 2012, our capital expenditures were limited primarily to maintaining our existing network.
Due to our low cash balance, we may be unable to replace or upgrade our installed technologies in response to competitors’
actions to build up their networks. Our future success depends, in part, on our ability to anticipate and respond in a timely
manner to technological changes. In particular, Axtel, S.A.B. de C.V. (“Axtel”) and “Total Play” (a company
owned by Grupo Salinas) have installed fiber optic networks that we believe may represent a significant competitive threat to
our existing network. This may require us to devote significant capital to the development, procurement or implementation of new
technologies and we currently do not have and in the future may not have the resources to implement such technologies.



There can be no assurance
as to the nature and extent of the impact of technological change on our viability or competitiveness. If any future technological
change places at risk our viability or competitiveness, the cost of upgrading our products and technology to remain competitive
could be significant and our ability to fund this upgrading may depend on our ability to obtain additional financing, which may
not be available on terms acceptable to us or at all.



Our telecommunications
network infrastructure has several vulnerabilities and limitations.



Our telecommunications
network is the source of all our revenues and any damages to or loss of our equipment or any problem with or limitation of our
network whether accidental or otherwise, including network, hardware and software failures may result in a reduction in the number
of our customers or usage level by our customers, our inability to attract new customers or increased maintenance costs, all of
which would have a negative impact on our results of operations. The development and operation of our network is subject to problems
and technological risks, including:



| | · | physical damage;
| | - | ----------------



| | · | power surges
                                                                                                             or outages;
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| | · | capacity limitations;
| | - | ---------------------



| | · | software defects
                                                                                                             as well as hardware
                                                                                                             and software obsolescence;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



12







| | · | breaches of security,
                                                                                                             whether by computer
                                                                                                             virus, break−in
                                                                                                             or otherwise;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | failure to interconnect
                                                                                                             with carriers linking
                                                                                                             us with our customers;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | denial of access
                                                                                                             to our sites for
                                                                                                             failure to obtain
                                                                                                             required municipal
                                                                                                             or other regulatory
                                                                                                             approvals; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | other factors
                                                                                                             which may cause interruptions
                                                                                                             in service or reduced
                                                                                                             capacity for our
                                                                                                             customers.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our operations also
rely on a stable supply of utilities service. We cannot assure you that future supply instability will not impair our ability
to procure required utility services in the future, which could adversely impact our business, financial condition and results
of operations.



We are subject
to delinquencies on our accounts receivable. If we are unable to limit payment delinquencies by our customers, or if delinquent
payments by our customers increase, our financial condition and results of operations could be adversely affected.



Our business significantly
depends on our customers’ ability to pay their bills and comply with their obligations to us. We do not perform credit checks
on residential customers who have never had service with us, which accounts for approximately 65% of our residential customers.
In the year ended December 31, 2012, we recorded provisions for doubtful accounts in the amount of Ps.68.4 million. In 2011, we
recorded provisions for doubtful accounts of Ps.154.8 million, primarily due to customers’ delinquencies. As of December
31, 2012, our provision for doubtful accounts as a percentage of our net revenues was 3.1%. As of December 31, 2011, our provision
for doubtful accounts as a percentage of net revenues was 6.5%.



If we are unable to
successfully implement policies to limit subscriber delinquencies or otherwise select our customers based on their credit records,
persistent customer delinquencies and bad debt will continue to adversely affect our operating and financial results.



In addition, if the
Mexican economy declines due to, among other factors, a reduction in the level of economic activity, depreciation of the Mexican
peso, an increase in inflation or an increase in domestic interest rates, a greater portion of our customers may not be able to
pay their bills on a timely basis, which would require an increase our provision for doubtful accounts and adversely affect our
financial condition and results of operations.



Our inability
to successfully upgrade our accounting, billing, customer service and management information systems as new technology becomes
available could increase our churn rates, inhibit our ability to attract new customers and result in decreased revenue and increased
costs.



Sophisticated information
and processing systems are important to our existing operations and future growth and our ability to monitor costs, deliver invoices,
process customer orders, provide customer service and achieve operating efficiencies. While we have installed systems we deem
necessary to conduct our operations efficiently, we intend to upgrade our accounting, information and processing systems as new
and more cost efficient technology becomes available. We believe we have budgeted for the applicable expenditures and will have
sufficient resources to make such investments. However, we cannot assure you that we will be able to successfully upgrade such
systems as technology advances and any inability to do so could increase our churn rates, inhibit our ability to attract new customers
and result in decreased revenue and increased costs and accordingly could materially and adversely affect our business, financial
condition and results of operations.



Service interruptions
due to natural disasters or unanticipated problems with our network infrastructure could result in customer loss.



Natural disasters
or unanticipated problems with our network infrastructure could cause interruptions in the services we provide. The failure of
a switch and our back-up system would result in the interruption of service to the customers served by that switch until necessary
repairs are completed or replacement equipment is installed. The successful operation of our network and its components is highly
dependent upon our ability to maintain the network and its components in reliable enough working order to provide sufficient quality
of service to attract and maintain customers. Any damage or failure that causes interruptions in our operations or lack of adequate
maintenance of our network could result in the loss of customers and increased maintenance costs that would adversely impact our
results of operations and financial condition.



13







We have backup data
for our key information and data processing systems that could be used in the event of a catastrophe or a failure of our primary
systems, and have established alternative communication networks where available. However, we cannot assure you that our business
activities would not be materially disrupted if there were a partial or complete failure of any of these primary information technology
systems or communication networks. Such failures could be caused by, among other things, software bugs, computer virus attacks
or conversion errors due to system upgrading. In addition, any security breach caused by unauthorized access to information or
systems, or intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, could have
a material adverse effect on our business, results of operations and financial condition.



The intellectual
property rights utilized by us, our suppliers or service providers may infringe on intellectual property rights owned by others.



Some of our products
and services use intellectual property that we own or license from others. We also provide content services we receive from content
distributors, such as ring tones, text games, video games, wallpapers or screensavers, and outsource services to service providers,
including billing and customer care functions, that incorporate or utilize intellectual property. We and some of our suppliers,
content distributors and service providers have received, and may receive in the future, assertions and claims from third parties
that the products or software utilized by us or our suppliers, content distributors and service providers infringe on the patents
or other intellectual property rights of these third parties. These claims could require us or an infringing supplier, content
distributor or service provider to cease engaging in certain activities, including selling, offering and providing the relevant
products and services. Such claims and assertions could also make us subject to costly litigation and significant liabilities
for damages or royalty payments, or require us to cease certain activities or to cease selling certain products and services.



Our insurance
coverage may not adequately cover losses resulting from the risks for which we are insured.



We maintain insurance
policies for our network facilities and all of our corporate assets. This insurance coverage protects us in the event we suffer
losses resulting from theft, fraud, natural disasters or other similar events or from business interruptions caused by such events.
In addition, we maintain insurance policies for our directors and officers. We cannot assure you however, that such insurance
will be sufficient or will adequately cover potential losses.



We intend to
start selling pre-paid mobile services and therefore we are exposed to a higher risk of customer churn.



We currently intend
to offer pre-paid mobile services in the Mexican market. Pre-paid customers do not enter into service contracts, which will make
our customer base more susceptible to switching mobile service providers.



We expect that many
of our future pre-paid customers will be first-time users of mobile telecommunications services, who have a tendency to migrate
among service providers more frequently than established users. To the extent our competitors may offer incentives to switch wireless
service providers, through eliminating connection fees and/or subsidizing or giving away handsets, the risk of churn will increase.
Our inability to retain future pre-paid customers and manage churn levels could have a material adverse effect on our business,
financial condition and results of operations.



We could be
adversely affected if major suppliers fail to provide needed equipment and services on a timely or cost-efficient basis or are
unwilling to provide us credit on favorable terms or at all.



We rely on a few strategic
suppliers and vendors, including Alcatel–Lucent, Microsoft, NEC and HP to provide us with equipment, materials and services
that we need in order to expand and to operate our business. There are a limited number of suppliers with the capability of providing
the network equipment and platforms that our operations and expansion plans require or the services that we require to maintain
our extensive and geographically widespread networks. In addition, because the supply of network equipment and platforms requires
detailed supply planning and this equipment is technologically complex, it would be difficult for us to replace the suppliers
of this equipment. Suppliers of cables that we need to extend and maintain our networks may suffer capacity constraints or difficulties
in obtaining the raw materials required to manufacture these cables.



14







We also depend on
network installation and maintenance services providers, equipment suppliers, call centers, collection agencies and sales agents,
for network infrastructure, and services to satisfy our operating needs. Many suppliers rely heavily on labor; therefore, any
work stoppage or labor relations problems affecting our suppliers could adversely affect our operations. Suppliers may, among
other things, extend delivery times, raise prices and limit supply due to their own shortages and business requirements. Similarly,
interruptions in the supply of telecommunications equipment for networks could impede network development and expansion. If these
suppliers fail to deliver products and services on a timely and cost-efficient basis that satisfies our demands or are unwilling
to sell to us on favorable credit terms or at all, we could experience disruptions, which could have an adverse effect on our
business, financial condition and results of operations.



We are subject
to different corporate disclosure and accounting standards than U.S. companies.



As a non-U.S. issuer,
investors may not be able to obtain as much publicly-available information about us as they would about U.S. issuers of publicly
traded securities. Therefore, potential investors may not be able to easily ascertain the risks facing us as they would if we
were a public U.S. company.



We recently began preparing our financial
statements in accordance with IFRS and, as a result, some of our financial data are not easily comparable from period to period.



On January 1, 2012,
we began preparing our financial statements in accordance with IFRS. Prior to the year ended December 31, 2011, we prepared our
financial statements only in accordance with MFRS. Therefore, our financial data as of and for the years ended December 31, 2011,
2010 and 2009 presented in prior year’s annual report on Form 20-F has been derived from our Annual Audited Financial Statements
prepared in accordance with MFRS. Because IFRS differs in certain significant respects from MFRS, MFRS financial information presented
in prior years is not directly comparable to our IFRS financial information in this annual report. The lack of comparability of
our financial data may make it difficult to gain a full and accurate understanding of our operations and financial condition in
periods prior to 2011.



Risks Relating to the Mexican Telecommunications Industry



The telecommunications
industry in Mexico is increasingly competitive, which may resulting lower prices for telecommunications services, lower margins
and/or a loss of market share.



The Mexican telecommunications
industry is increasingly competitive and rapidly changing. We face significant competition from Telmex (the incumbent wireline
telecommunications provider in Mexico) as well as other telecommunications providers and new market entrants such as cable operators.
Telmex is the largest telecommunications service provider in Mexico with a market shares of 72.5% in telephone services and 72.1%
in broadband internet access. In addition, cable operators who have substantial coverage of cities we currently serve may offer
the same voice and data services we provide at lower prices since telephony income represents incremental revenue to cable operators.
The emergence of satellite television in Mexico as one of the main competitors of cable television has adversely affected the
demand for cable, especially since satellite television providers are not limited by network coverage. Many of our current and
potential competitors have significantly more employees and greater financial, technical, marketing and other resources than we
do. Increased competition could result in fewer customers, reduced pricing, reduced gross and operating margins and loss of market
share, any of which could harm our business.



In 2011, Axtel and
“Total Play” began offering high end fiber optic services in a number of the markets we serve. As a result of this
high−end offering, operators promise high capacities, valued added and quadruple−play benefits.



15







We expect increased
competition in our upper and medium income socio−economic segments coverage in the short-term and in the medium-term we
expect this product to spread to other segments. If we are unable to offer similar products at competitive prices, we may lose
significant market share which would have a material adverse effect on our business and results of operation.



Rate pressure
could have a material adverse effect on our business, results of operations and our financial condition.



We expect the Mexican
telecommunications market to continue to experience rate pressure, primarily as a result of:



| | · | increased competition
                                                                                                             and focus by our
                                                                                                             competitors on increasing
                                                                                                             market share;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | technological
                                                                                                             advances that allow
                                                                                                             higher transmission
                                                                                                             capacities of both
                                                                                                             new and existing
                                                                                                             fiber−optic
                                                                                                             networks, results
                                                                                                             in better margins
                                                                                                             and more bandwidth
                                                                                                             offering;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | increased participation
                                                                                                             by traditional fixed−line
                                                                                                             competitors in the
                                                                                                             provision of data
                                                                                                             and pay TV services;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the entrance
                                                                                                             of cable television
                                                                                                             operators into certain
                                                                                                             markets that we currently
                                                                                                             serve and the provision
                                                                                                             by such operators
                                                                                                             of services we have
                                                                                                             historically provided,
                                                                                                             such as telecommunications
                                                                                                             and broadband Internet;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the entrance
                                                                                                             of new competitors,
                                                                                                             such as broadcasting
                                                                                                             companies, OTT IPTV
                                                                                                             service providers
                                                                                                             or the Mexican Federal
                                                                                                             Power Commission
                                                                                                             (Comision Federal
                                                                                                             de Electricidad,
                                                                                                             or “CFE”);
                                                                                                             and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the merger or
                                                                                                             consolidation of
                                                                                                             some concessionaires
                                                                                                             (fix−mobile−cable),
                                                                                                             which may affect
                                                                                                             market penetration.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Continued rate pressure
could have a material adverse effect on our business, financial condition and results of operations if we are unable to generate
sufficient traffic and increased revenues to offset the impact of decreased rates on our operating margin.



Moreover, these developments
may lead to smaller operating margins, greater choices for customers and increasing movement of customers among competitors, which
may make it more difficult for us to retain customers or add new customers. The cost of adding new customers may also continue
to increase, reducing profitability. In addition, as the cost of acquiring new customers is higher than the cost of maintaining
existing customers, high levels of customers deactivations could have an adverse effect on our results of operations, even if
we are able to obtain one new customers for each lost customers.



We experience increasing
pressure to reduce our rates in response to pricing competition. This pricing competition often takes the form of special promotional
packages. Competing with the service plans and promotions offered by our competitors may cause an increase in our marketing expenses
and customer acquisition costs, which may adversely affect our results of operations. Our inability to compete effectively with
these packages could result in our loss of market share and adversely affect our net operating revenue and profitability.



Our ability to compete
successfully will depend on our network coverage, the quality of our network and service, our rates, customer service, marketing
and our ability to anticipate and respond to various competitive factors affecting the telecommunications industry, including
new services and technologies, changes in consumer preferences, demographic trends, economic conditions and discount pricing strategies
by competitors. If we are unable to respond to competition and compensate for declining prices by adding new subscribers, increasing
usage and offering new services, our business, financial condition and results of operations could be adversely affected.



16







Our fixed-line
telecommunications services face increased competition from mobile service providers and other fixed-line service providers, which
may adversely affect our revenues and margins.



Our fixed-line telecommunications
services face increasing competition from mobile services as the prices for mobile services decline and approach those of fixed-line
services. We expect the number of fixed lines in service to continue to decline or stagnate, as certain customers eliminate their
fixed-line services in favor of mobile services, and the use of existing fixed lines to decrease as customers substitute fixed-line
calls with calls from mobile telephones as a result of lower mobile rates. The rate at which the number of fixed lines in service
in Mexico may decline depends on many factors beyond our control, such as economic, social, technological and other developments
in Mexico.



We also compete in
the market for fixed-line services with other fixed-line service providers, primarily Telmex, Axtel, Alestra, S. de R.L. de C.V.
(“Alestra”). In addition to direct competition, we also face competition from other providers of value-added services
that offer VoIP and other Internet-based telephony. Our loss of a significant number of fixed-line customers would adversely affect
our operating revenue and may adversely affect our results of operations.



If the Mexican
government grants more concessions, the value of our concessions could be severely impaired.



The telecommunications
industry is regulated by the Mexican government. Our concessions are not exclusive and the Mexican government may grant concessions
covering the same geographic regions and frequency bands to other entrants. We cannot assure you that additional concessions granted
by the Mexican government to provide similar services to those we provide or plan to provide will not be granted to other competitors
and that the value of our concessions will not be adversely affected.



On March 2008, the
SCT auctioned the 1850−1910/1930−1990 MHz and 1710−1770/2110−2170 MHz, 3400−3700 MHz, 71−76/81/86
GHz and 410−430 MHz spectrum segments.



On November 2009,
the SCT published bid terms for auctioning the 1710−1770/2110−2170 MHz spectrum segment and 1850−1910/1930−1990
MHz, spectrum segments under independent processes. The 1710−1770/2110−2170 MHz spectrum was assigned to Radiomovil
Dipsa, S.A. de C.V. (“Telcel”), a subsidiary of América Movil, S.A.B. de C.V., and Pegaso Comunicaciones y
Sistemas, S.A. de C.V. (“Telefonica Movistar”), while the 1850−1910/1930−1990 MHz spectrum was assigned
to a consortium between Nextel de Mexico, S.A. de C.V. (“Nextel”) and Televisa, S.A. de C.V. (“Televisa”),
to Telecomunicaciones del Golfo, S.A. de C.V., a subsidiary of Grupo Iusacell, S.A. de C.V. (“Iusacell”) and Telefonica
Movistar. These auctions and the corresponding awards are currently under legal dispute by Iusacell.



The awarding of spectrum
segments opened the market to new concessions and to new technologies, such as WiMax, that may compete with some of the services
we provide. An auction for the 3400−3700 MHz spectrum segment was expected to take place during 2011, but it did not occur.
If this auction takes place during 2013, we will explore whether to participate. In the event we fail to successfully bid for
this spectrum, we may not be able to provide additional services to our customers that are dependent on these spectrums, which
could have an adverse effect on our business prospects and results of operation.



We could lose
our concessions if we do not fully comply with their terms and we may not be able to renew our existing concessions.



We hold concessions
that enable us to provide telecommunications services. Under the terms of our concessions, we are required to meet a number of
technical, build-out and financial conditions and in the past we have failed to meet some of these conditions such as providing
coverage to cities within the scope of our concessions within the time-frame provided for in the concession. We cannot assure
you that we will not be fined for our past failures to comply with the terms of our concessions. In addition, any failure to comply
with any of the terms of our concessions or to obtain a waiver or modification could result in the termination of those concessions,
the imposition of new terms applicable to our concessions, the imposition of fines or the loss of surety bonds that we have issued
to the SCT. The Mexican government is not required to compensate us in the event of such termination.



17







Furthermore, all of
our concessions have a specified duration of 10 to 30 years and are scheduled to expire between 2016 and 2028. Mexican law provides
that concessions, except for the microwave transmission concessions which will be reauctioned, may be renewed at the discretion
of the SCT for a period equal to the duration of the original concession if certain requirements are met, including being in compliance
with the terms of the concession. There can be no assurances that any of our concessions will be renewed or under what terms they
would be renewed or that we will successfully bid for and retain the microwave transmission concessions.



If any of our key
concessions, including our local and long distance telephony concession, were terminated or not renewed, we would be unable to
engage in our business.



Under Mexican
law, our concessions could be expropriated or temporarily seized.



Holders of concessions
to install, operate and develop public telecommunications networks are subject to the provisions of the Mexican Federal Telecommunications
Law (Ley Federal de Telecomunicaciones)and any other provision contained in the relevant concession grant and other applicable
laws. The Mexican government (through the SCT) may expropriate any telecommunications concession and claim any related asset for
reason of public interest or national security, or may temporarily seize the assets related to the concessions in the event of
natural disasters, war, significant public disturbance or threats to internal peace or for other reasons relating to economic
or public order.



Mexican law sets forth
the process for indemnification for direct damages arising out of the expropriation or temporary seizure of the assets related
to the concessions, except in the event of war. However, in the event of expropriation, we cannot assure you that the indemnification
will equal the market value of the concessions and related assets or that we will receive such indemnification in a timely manner
or at all.



Fraudulent use
of telecommunications networks increases our expenses.



The fraudulent use
of telecommunications networks imposes a significant cost upon service providers, who must bear the cost of services provided
to fraudulent users. We suffer a loss of revenue as a result of fraudulent use and a cash cost due to our obligation to reimburse
carriers for the cost of services provided to fraudulent users. These costs also include administrative and capital costs associated
with monitoring and preventing the incidence of fraud, as well as raising interconnection costs and capacity costs. We cannot
assure you that our efforts to combat fraud will be effective or that fraud will not result in material costs for us in the future.
In addition, since we rely on other long−distance carriers for interconnection, some of which do not have anti−fraud
technology incorporated in their networks, we are particularly exposed to this risk in our long−distance service and in
traffic originating in our network to mobile users under the mode of “calling party pays.”



“Long−distance
Calling Party Pays” system could result in a loss of customer traffic and revenue.



In 1997, Cofetel implemented
the “Calling Party Pays” system, and in 2006 the “Long-distance Calling Party Pays” system, whereby the
customer originating a domestic or international call, from either a fixed line or mobile phone to a mobile phone, pays the entire
fee for placing the call rather than the mobile telephone subscriber who receives such call, who only pays for outgoing calls.
Even though the mobile telephone subscriber receiving the call does not pay to receive the call, the network from which the call
originates must still compensate the terminating mobile network.



In 2006, we negotiated
with the mobile carriers a provisional “Calling Party Pays” interconnection tariff for local and long−distance
calls to be terminated in such mobile operators’ network, achieving a significant reduction of the original tariff contemplated
by the agreements implementing this system issued by Cofetel, for the period 2006 to 2010.



For the 2011 Cofetel
has issued a resolution regarding “Calling Party Pays” interconnection tariffs with the mobile carriers, and has determined
the tariff at Ps.0.3912. It is probable that for the subsequent years until 2015, Cofetel will issue, on a yearly basis, resolutions
oriented to lowering the tariff set forth in 2011. If Cofetel applies the same cost model used for the 2011 resolution, the most
probable scenario would be a 10% further decrease in the interconnection tariff.



18







Furthermore, we have
filed a dispute for retroactive interconnection tariffs against the mobile carriers for the years 2006 to 2010 before Cofetel.
Some local operators have reached an agreement with respect to the “Calling Party Pays” interconnection tariffs for
2012, 2013 and 2014 at Ps.0.3618, Ps.0.3305 and Ps.0.3094, respectively, while other operators, including us, have not reached
an agreement but are currently paying the tariffs.



We have not
been able to reach an agreement with Telmex regarding interconnection rates for 2008, 2009, 2010, 2011 and 2012.



We have not yet reached
an agreement with Telmex regarding the interconnection rates for 2008, 2009, 2010, 2011 and 2012. Cofetel has not issued a resolution
regarding the rates to be applied for 2008, 2009, 2010, and 2012 and Telmex has disputed the 2011 resolution. We are currently
unable to estimate the outcome of this dispute.



Foreign ownership
restrictions may limit our ability to raise equity capital.



The Mexican Foreign
Investment Law (Ley Federal de Inversion Extranjera) and the Mexican Federal Telecommunications Law (Ley Federal de
Telecomunicaciones) currently provide that no more than 49% of the full voting stock of a Mexican corporation holding a concession
to provide telecommunications services, other than mobile services, may be held by non−Mexicans. In addition, our shares
held by foreign investors are held in the form of ordinary participation certificates (certificados de participacion ordinarios,or “CPOs”) issued by a trustee, which are also referred to as neutral investment shares or securities that do
not grant any voting rights and may not represent more than 95% of our total capital stock. Because of such restrictions, we have
limited flexibility to raise equity capital from non−Mexican investors. As a result, any future sales of equity securities
may require substantial participation by Mexicans, the issuance of non−voting securities to foreign investors (such as CPOs)
or a modification of Mexican foreign investment laws and regulations, which could limit our ability to raise equity capital which
could have an adverse effect on our business, financial condition and results of operations.



Notwithstanding the foregoing, a recent
initiative passed by the Mexican executive branch and the Mexican Congress, and expected to be published in the near term, will
amend the Mexican Constitution, seeking to give the state enough power to guarantee competition and end monopolistic practices
in the industry. The bill also ends the current 49% limit on foreign investment in fixed-line telephony, and raises the foreign
ownership cap for television to 49%. In this regard, if the bill is approved in its current terms, the risk related to foreign
investment restrictions will no longer be applicable.



We operate in a highly regulated
industry which is currently experiencing broad−based regulatory changes.



The operation of the
telecommunications sector in Mexico, including ours, has been subject to laws and regulations administered by the SCT and Cofetel.



During 2007 Cofetel
issued the rules for the implementation of number portability effective July 5, 2008. As of this date, the portability service
has been operating properly, with the exception of certain third party networks that still take longer than established to route
calls to the receiving user. We cannot predict the consequences that portability will have on the market or how it might affect
our business. The application of the Mexican Federal Telecommunications Law, the convergence resolution and the number portability
rules could adversely affect our business and subject us to additional legal liability or obligations. For more information, see
“Industry –– Market Liberalization.



An amendment to the
internal operating rules of the SCT (Reglamento Interior de la Secretaria de Comunicaciones y Transportes) was issued during
2008, increasing the authority granted to the SCT by allowing it to assume certain responsibilities of Cofetel. These new rules
will cause an amendment tothe internal operating rules of Cofetel in the near future. The resulting regulatory changes could adversely
affect our business and subject us to additional legal liability or obligations, as the decisions to be taken by the SCT and Cofetel
could be delayed or take longer period of time to be resolved, especially since such operating rules had been challenged by some
operators and authorities.



19







In addition to the
foregoing, several key provisions of the Mexican Antitrust Law (Ley Federal de Competencia Economica)have also been recently
revised and declared unconstitutional by the Mexican Supreme Court of Justice, thereby limiting the ability of the Mexican Antitrust
Commission (Comision Federal de Competencia, or “CFC”) to obtain information for the analysis of dominant carrier
status and antitrust practices.



During 2008, 2009,
2010 and 2011 the CFC issued a preliminary declaration, stating that all fixed and mobile service providers may have significant
market power in the traffic termination market. We are unable to predict if the final declaration will take this position, which
could adversely affect our business and subject us to additional legal liability or obligations. If we are declared to have significant
power in the traffic termination market in a final declaration by the CFC, our rates could be regulated and we could be required
to comply with certain level of quality in services and information.



If any of our
telecommunication concessions is revoked, we could be prevented from applying for a new

concession within five years.



Article 39 of the
Mexican Federal Telecommunications Law provides that, in case the SCT revokes a concession from a concession holder, such concession
holder will be prevented from obtaining any new concessions or permits from those indicated in the Mexican Federal Telecommunications
Law, for a term of 5 years from the date on which revocation takes effect.



The inability to apply
for a new concession for such period of time could adversely affect our business financial condition and results of operations.



Risks Related to Mexico



Mexican and
global economic conditions may adversely affect us.



The global economy
continues to be uncertain, and many companies have limited access to funding. This risk has been exacerbated by concerns over
the higher levels of public debt, wider fiscal deficit and credit rating downgrades on public debt of European countries such
as the Republic of Ireland, Greece, Portugal, Italy, France and Spain and the downgrade and risk of a potential credit deterioration
of the U.S. economy. This global economic downturn and/or any future economic downturn, including downturns in the United States
and Europe, could affect our financial condition and results of operations.



Additionally, this
recent volatility in the global financial markets and ongoing uncertainty affecting these markets have resulted in extreme volatility
in the credit, equity and fixed income markets. This volatility has limited many companies’ access to funding. If access
to credit tightens further and borrowing costs rise, our costs could be adversely affected. Difficult financial markets may also
adversely affect some of our customers.



The Mexican economy
may be, to varying degrees, affected by economic and market conditions in other countries. Although economic conditions in other
countries may differ significantly from economic conditions in Mexico, investors’ reactions to adverse developments in other
countries may have an adverse effect on the market value of securities of Mexican issuers. In recent years, for example, the prices
of both Mexican debt and equity securities decreased substantially as a result of the prolonged decrease in the United States
securities markets. Most recently, credit issues in the United States related principally to the sale of sub-prime mortgages have
resulted in significant fluctuations in the financial markets.



In addition, in recent
years economic conditions in Mexico have become increasingly correlated with economic conditions in the United States as a result
of the North American Free Trade Agreement (“NAFTA”) and increased economic activity between the two countries. Therefore,
adverse economic conditions in the United States, the termination or re-negotiation of NAFTA or other related events could have
a significant adverse effect on the Mexican economy. We cannot assure you that events in other emerging market countries, in the
United States or elsewhere will not adversely affect our business, financial condition or results of operations.



20







Mexican federal
governmental policies or regulations, as well as economic, political and social developments in Mexico, could adversely affect
our business, financial condition, results of operations and prospects.



We are incorporated
in Mexico and substantially all of our assets and operations are located in Mexico. As a result, we are subject to political,
legal and regulatory risks specific to Mexico which can have a significant impact on our business, results of operations and financial
condition. The Mexican federal government has exercised, and continues to exercise, significant influence over the Mexican economy.
Accordingly, Mexican federal governmental actions, fiscal and monetary policy could have an impact on Mexican private sector entities,
including our company, and on market conditions, prices and returns on Mexican securities. We cannot predict the impact that political
conditions will have on the Mexican economy. Furthermore, our business, financial condition, results of operations and prospects
may be affected by currency fluctuations, price instability, inflation, interest rates, regulation, taxation, social instability
and other political, social and economic developments in or affecting Mexico, over which we have no control. We cannot assure
potential investors that changes in Mexican federal governmental policies will not adversely affect our business, financial condition,
results of operations and prospects.



Presidential elections
in Mexico occur every six years, with the most recent one occurring in July 2012. Currently, no single party has succeeded in
securing a majority in the senate or the Camara de Diputados(House of Representatives), and the absence of a clear majority
by a single party could continue, which may result in government gridlock and political uncertainty due to the Mexican congress’
potential inability to reach consensus on the structural reforms required to modernize certain sectors of and foster growth in
the Mexican economy. We cannot provide any assurances that political developments in Mexico, over which we have no control, will
not have an adverse effect on our business, financial condition, results of operations and prospects.



Mexico has recently
experienced periods of violence and crime due to the activities of drug cartels. In response, the Mexican government has implemented
various security measures and has strengthened its police and military forces. Despite these efforts, drug-related crime continues
to exist in Mexico. These activities, their possible escalation and the violence associated with them may have a negative impact
on the Mexican economy or on our operations in the future. The social and political situation in Mexico could adversely affect
the Mexican economy, which in turn could have a material adverse effect on our business, results of operations and financial condition.



Political and
economic developments in Mexico may adversely affect our business.



The majority of our
customers are Mexican companies or individuals, and all of our operations and the vast majority of our assets are located in Mexico.
For these reasons, our operations, results and financial condition are dependent upon the level of economic activity in Mexico.
Telecommunications traffic in Mexico and our revenues are highly affected by the level of economic activity in Mexico and the
general purchasing power of individuals and companies. Accordingly, declines in our customers’ spending could have additional
negative effects on our revenues. Economic slowdowns in Mexico may have additional consequences that impact our business. We also
face risks associated with the impact of economic downturns on third parties, such as suppliers, financial institutions and other
parties with which we do business. If these parties experience negative effects on their businesses due to the economic crisis,
it could negatively affect our business or operating results.



The Mexican government
has exercised, and continues to exercise, significant influence over the Mexican economy. Accordingly, Mexican federal governmental
actions and policies concerning the economy could have a significant impact on private sector entities in general and on us in
particular and on market conditions, prices and returns on Mexican securities.



Changes to Mexican
laws, regulations and decrees applicable to us could have a material adverse effect on our business, results of operations and
financial condition.



The telecommunications
sector in Mexico is subject to numerous laws and extensive regulations by a number of governmental authorities, including the
SCT and Cofetel, which are responsible for, among others, formulating policy, granting licenses, setting tariff schemes, regulating
interconnection among providers, levying taxes on services and supervising the provision of services. Laws applicable to our business
may be enacted, amended or repealed and governmental agencies may make regulatory interpretations or take regulatory actions that
could damage our business, increase competition, increase our costs of operation, decrease our revenues, and limit our ability
to grow our operations, or otherwise adversely impact our business.



21







Peso devaluation
relative to the U.S. dollar could make it more difficult for us to service our indebtedness and could decrease the value of the
notes due 2014.



While our revenues
are almost entirely denominated in pesos, the majority of our obligations and all of our long−term indebtedness are denominated
in U.S. dollars. In addition, most of our capital expenditures are denominated in U.S. dollars. We are, and will continue to be,
exposed to peso devaluation risk. The peso has devalued substantially against the U.S. dollar in the past and may devalue significantly
in the future. For example, the noon buying rate rose from Ps.3.45 per U.S.$1.00 on December 19, 1994 to Ps.5.00 per U.S.$1.00
on December 31, 1994 and Ps.7.74 per U.S.$1.00 on December 31, 1995, representing a 124.6% devaluation of the peso relative to
the U.S. dollar from December 19, 1994 to December 31, 1995. The peso appreciated relative to the U.S. dollar 0.1% in 2007, depreciated
24.6% in 2008, appreciated 3.5% in 2009, appreciated 5.4% in 2010, depreciated 13.2% in 2011 and appreciated 7.0% in 2012.



The general economic
conditions in Mexico resulting from a peso devaluation and consequential inflation may have an adverse effect on our results of
operation by:



| | · | increasing the
                                                                                                             peso-carrying costs
                                                                                                             of our U.S. dollar-denominated
                                                                                                             debt and capital
                                                                                                             expenditure requirements;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | decreasing the
                                                                                                             purchasing power
                                                                                                             of Mexican consumers,
                                                                                                             resulting in a decrease
                                                                                                             in demand for telephony
                                                                                                             services; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | resulting in
                                                                                                             our inability, due
                                                                                                             to competitive pressures,
                                                                                                             to increase our prices
                                                                                                             in response to such
                                                                                                             inflation.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The peso−to−dollar
exchange rate may experience significant devaluations in the future. Further declines in the value of the peso relative to the
U.S. dollar could adversely affect our ability to meet our U.S. dollar−denominated obligations, including the notes due
2014. In order to diminish the negative effects of a peso devaluation, in May 2007 we entered into currency swap transactions
with Morgan Stanley A.G. and Merrill Lynch Capital Markets A.G. to minimize the exchange rate risks related to the coupon payments
with respect to U.S.$150 million aggregate principal amount of the notes due 2014, for payments during the period from June 2008
to December 2010. In December 2009, the company unwound the swap with Morgan Stanley A.G. and entered into a new swap with the
same bank that covers the exchange rate risk related to the coupon payments with respect to U.S.$75 million aggregate principal
amount of the notes due 2014, for payments during the period from June 2010 to December 2014.



In March 2010 we unwound
the swap with Merrill Lynch Capital Markets A.G. and entered into a new cross currency swap transaction with Morgan Stanley A.G.
that minimizes the exchange rate risk related to the coupon payments with respect to U.S.$75 million aggregate principal amount
of the notes due 2014, for payments during the period from June 2010 to December 2014.



In May 2011 we amended
the cross currency swap agreements with Morgan Stanley (France), SAS to delete from the agreements the clause authorizing Morgan
Stanley to terminate the agreements in case the credit rating of Maxcom continues to decline. In counterpart, we agreed to deposit
U.S.$1.5 million in a collateral account in Morgan Stanley.



At December 31, 2012
an immediate 10% devaluation of the peso relative to the U.S. dollar would have increased our interest expense (related to the
interest payments on the U.S.$50 million aggregate principal amount of our notes not covered by the currency swaps; we have coverage
over the interest payments of U.S.$150 million) by approximately Ps.7.2 million over a one−year period. In addition, any
further decrease in the value of the peso may negatively affect the value of the notes due 2014.



In February 2013,
we have unwound all of our outstanding swap agreements and as a result, we remain exposed to fluctuations of the peso relative
to the U.S. dollar, which could have a material adverse effect on our ability to meet our payment obligations denominated in U.S.
dollars, thereby adversely affecting our financial condition.



22







High inflation
rates in Mexico may decrease demand for our services while increasing our costs.



In recent years, Mexico
has experienced higher levels of inflation relative to the United States, its main commercial partner. Mexico’s annual rate
of inflation was 3.6% during 2012, 3.8% in 2011, 4.4% in 2010, 3.6% in 2009, 6.5% in 2008 and 3.8% in 2007. High inflation rates
can adversely affect us as follows:



| | · | inflation can
                                                                                                             adversely affect
                                                                                                             consumer purchasing
                                                                                                             power, thereby adversely
                                                                                                             affecting consumer
                                                                                                             demand for our services
                                                                                                             and products; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | to the extent
                                                                                                             inflation exceeds
                                                                                                             our price increases,
                                                                                                             our prices and revenues
                                                                                                             will be adversely
                                                                                                             affected in real
                                                                                                             terms.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



High interest
rates in Mexico could increase our financing costs.



Mexico has, and is
expected to continue to have, high real and nominal interest rates, relative to the United States, its main commercial partner.
The interest rates on 28−day Mexican government treasury securities averaged, 4.2% for the year ended December 31, 2012,
4.2% in 2011, 4.4% in 2010, 5.4% in 2009, 7.7% in 2008 and 7.2% in 2007. Although we do not currently have any peso−denominated
indebtedness, if we need to incur such indebtedness in the future, it will likely be at high interest rates.



We could be
negatively affected by “by-pass” international traffic.



Pursuant to regulations
of the Mexican Federal Telecommunications Commission (Comisión Federal de Telecomunicacionesor the Cofetel), international
long-distance traffic in Mexico must be routed and terminated through authorized international gateways at established international
settlement rates. However, less expensive alternatives which by-pass authorized gateways exist, particularly in the case of countries
with whom Mexico exchanges a significant amount of traffic. Given the disparity between the government-authorized and alternative
long-distance interconnection and termination rates through local service routes and/or Internet Protocol services, an increasing
portion of the long-distance market between Mexico and the United States is served by entities that circumvent or “by-pass”
the international long-distance interconnection system. This practice is illegal under applicable law.



Maxcom cannot confirm
whether any of its high-volume customers are engaging in “by-pass” activities because it is not required to make such
a determination under Mexican regulations and therefore has not implemented a system to detect such activity. Maxcom is required,
however, to comply with competent authority order to disconnect a customer deemed to be engaged in “by-pass” activities.
In 2000, Mexican regulatory authorities announced their intention to conduct more rigorous audits of persons or companies believed
to be engaged in “by-pass” activities. In December 2000, some of the major Mexican long-distance carriers, including
Maxcom, signed a cooperation agreement to combat “by-pass” activities. If, as a consequence of such actions, the regulatory
authorities determine that any of our high-volume customers are engaged in “by-pass” activity, Maxcom would be required
to disconnect their service and our revenues could be negatively affected.



Our telecommunications
network infrastructure has several vulnerabilities and limitations.



Our telecommunications
network is the source of all our revenues. Any problem with or limitation of our network may result in a reduction in the number
of our customers or usage level by our customers, our inability to attract new customers or increased maintenance costs, all of
which would have a negative impact on our revenues and net income. The development and operation of our network is subject to
problems and technological risks, including:



| | · | physical
                                                                                                                      damage;
| | - | --------------------------------------------------------------------------------------------------------------------------------------



| | · | power
                                                                                                                      loss;
| | - | ---------------------------------------------------------------------------------------------------------------------------------



23







| | · | capacity
                                                                                                                      limitations;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------



| | · | software
                                                                                                                      defects
                                                                                                                      as well
                                                                                                                      as hardware
                                                                                                                      and software
                                                                                                                      obsolescence;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | breaches
                                                                                                                      of security,
                                                                                                                      whether
                                                                                                                      by computer
                                                                                                                      virus, break-in
                                                                                                                      or otherwise;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | failure
                                                                                                                      to interconnect
                                                                                                                      with carriers
                                                                                                                      linking
                                                                                                                      us with
                                                                                                                      our customers;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | denial
                                                                                                                      of access
                                                                                                                      to our sites
                                                                                                                      for failure
                                                                                                                      to obtain
                                                                                                                      required
                                                                                                                      municipal
                                                                                                                      or other
                                                                                                                      regulatory
                                                                                                                      approvals;
                                                                                                                      and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | other
                                                                                                                      factors
                                                                                                                      which may
                                                                                                                      cause interruptions
                                                                                                                      in service
                                                                                                                      or reduced
                                                                                                                      capacity
                                                                                                                      for our
                                                                                                                      customers.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our indebtedness could
have a material adverse effect on our financial condition, including our ability to fulfill our obligations under our senior notes
due 2014 and our ability to operate our business and implement our business plan.



We are highly leveraged.
As of December 31, 2012 and2011 and January 1, 2011, we had total indebtedness in the amount of Ps.2,305.4, (U.S.$177.2 million),
Ps.2,767.8 million (U.S.$198.0 million) and Ps.2,452.2 (U.S.$198.4 million), respectively, which consists primarily of U.S.$200
million aggregate principal of senior notes due 2014, of which the Company repurchased U.S.$22.9. We will use approximately U.S.$22
million annually from our cash flows to service our senior notes due 2014 (interest payments only). Despite our current level
of indebtedness, we may be able to incur additional indebtedness. Although the terms of the indenture governing the senior notes
due 2014 restrict us and our restricted subsidiaries from incurring additional indebtedness, these restrictions are subject to
important exceptions and qualifications including with respect to our ability to incur additional senior indebtedness. If we or
our subsidiaries incur additional indebtedness to finance working capital, capital expenditures, investments or acquisitions or
for other purposes, the risks related to our business associated with our high level of indebtedness could be intensified. Specifically,
our high level of indebtedness could have important consequences to our business, including consequences that could:



| | · | make
                                                                                                                      it more
                                                                                                                      difficult
                                                                                                                      for us to
                                                                                                                      satisfy
                                                                                                                      our obligations
                                                                                                                      with respect
                                                                                                                      to our indebtedness;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | require
                                                                                                                      us to dedicate
                                                                                                                      a substantial
                                                                                                                      portion
                                                                                                                      of our cash
                                                                                                                      flow from
                                                                                                                      operations
                                                                                                                      to debt
                                                                                                                      service
                                                                                                                      payments,
                                                                                                                      reducing
                                                                                                                      the funds
                                                                                                                      available
                                                                                                                      for working
                                                                                                                      capital,
                                                                                                                      capital
                                                                                                                      expenditures,
                                                                                                                      acquisitions
                                                                                                                      and other
                                                                                                                      general
                                                                                                                      corporate
                                                                                                                      purposes;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | limit
                                                                                                                      our flexibility
                                                                                                                      in planning
                                                                                                                      for, or
                                                                                                                      reacting
                                                                                                                      to, changes
                                                                                                                      in the telecommunications
                                                                                                                      industry;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | limit
                                                                                                                      our ability
                                                                                                                      to take
                                                                                                                      advantage
                                                                                                                      of opportunities
                                                                                                                      for acquisitions
                                                                                                                      and other
                                                                                                                      business
                                                                                                                      combinations;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | place
                                                                                                                      us at a
                                                                                                                      competitive
                                                                                                                      disadvantage
                                                                                                                      compared
                                                                                                                      to our less
                                                                                                                      leveraged
                                                                                                                      competitors;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | increase
                                                                                                                      our vulnerability
                                                                                                                      to both
                                                                                                                      general
                                                                                                                      and industry-specific
                                                                                                                      adverse
                                                                                                                      economic
                                                                                                                      conditions;
                                                                                                                      and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | limit
                                                                                                                      our ability
                                                                                                                      to obtain
                                                                                                                      additional
                                                                                                                      financing
                                                                                                                      or obtain
                                                                                                                      it on commercially
                                                                                                                      reasonable
                                                                                                                      terms, to
                                                                                                                      fund future
                                                                                                                      working
                                                                                                                      capital,
                                                                                                                      capital
                                                                                                                      expenditures,
                                                                                                                      acquisitions
                                                                                                                      or other
                                                                                                                      general
                                                                                                                      corporate
                                                                                                                      requirements
                                                                                                                      and increasing
                                                                                                                      our cost
                                                                                                                      of borrowing.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If we and our subsidiaries
incur additional indebtedness in the future, the leverage-related risks that we now face could intensify and have a material adverse
effect on business, results of operation and financial condition.



24







The indenture governing
our senior notes due 2014 contains restrictions on our ability to operate our business and to pursue our business strategies.
Our failure to comply with these covenants could result in an acceleration of our indebtedness.



The indenture governing
our senior notes due 2014 contains covenants that may restrict our ability to finance future operations or capital needs, to respond
to changing business and economic conditions or to engage in certain transactions or business activities that may be important
to our growth strategy, necessary to remain competitive or otherwise important to us. The indenture restricts, among others, our
ability to:



| | · | incur
                                                                                                                      additional
                                                                                                                      indebtedness;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | pay
                                                                                                                      dividends
                                                                                                                      or make
                                                                                                                      other distributions
                                                                                                                      on our capital
                                                                                                                      stock or
                                                                                                                      repurchase
                                                                                                                      our capital
                                                                                                                      stock or
                                                                                                                      subordinated
                                                                                                                      indebtedness;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | make
                                                                                                                      investments
                                                                                                                      or other
                                                                                                                      specified
                                                                                                                      restricted
                                                                                                                      payments;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | create
                                                                                                                      liens;
| | - | -----------------------------------------------------------------------------------------------------------------------------------



| | · | enter
                                                                                                                      into mergers,
                                                                                                                      consolidations,
                                                                                                                      sales of
                                                                                                                      substantially
                                                                                                                      all of our
                                                                                                                      assets and
                                                                                                                      other forms
                                                                                                                      of business
                                                                                                                      combinations;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | enter
                                                                                                                      into change
                                                                                                                      of control
                                                                                                                      transactions;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | sell
                                                                                                                      assets and
                                                                                                                      subsidiary
                                                                                                                      stock; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | enter
                                                                                                                      into transactions
                                                                                                                      with affiliates
                                                                                                                      of the following
                                                                                                                      nature:
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (i) | the transaction is on terms no
                                                                less favorable to Maxcom or the relevant restricted subsidiary
                                                                than those that would have been obtained in a comparable transaction
                                                                by the Maxcom or such restricted subsidiary with an unrelated
                                                                entity;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | in transactions involving in
                                                                 excess of U.S.$1.0 million, a majority of the disinterested directors
                                                                 have determined that the transaction complies with (i); and
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | in transactions involving in
                                                                  excess of U.S.$6.0 million, Maxcom shall deliver to the trustee
                                                                  a fairness opinion from an investment banking firm of national
                                                                  standing.
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If we do not comply
with these restrictions, we could be in default despite our ability to service our indebtedness. If there were an event of default
under the indenture governing our senior notes due 2014, holders of such senior notes could demand immediate payment of the aggregate
principal amount and accrued interest on such senior notes outstanding which, as of December 31, 2012, was an amount equal to
U.S.$200 million aggregate principal of senior notes due 2014, of which the Company repurchased U.S.$22.9 (nominal amount).. This
could lead to our inability to pay our obligations or to our bankruptcy or reorganization for the benefit of our creditors. Any
additional financings we obtain in the future would most likely contain similar or more restrictive covenants.



The terms of the indenture
governing our senior notes due 2014 restrict us and our restricted subsidiaries from incurring additional indebtedness are subject
to certain exceptions and qualifications, including exceptions allowing us to incur capital lease, financing and purchase money
obligations not exceeding U.S.$10 million and additional indebtedness not exceeding U.S.$10 million. If we or our subsidiaries
incur additional indebtedness to finance working capital, capital expenditures, investments or acquisitions or for other purposes,
the risks related to our business associated with our high level of indebtedness could be intensified.



Local
Exchange Interconnection Tariffs



In 2008, Local Exchange
Carriers (“LEC”) (Alestra, Avantel/Axtel, MCM Comunicaciones, S.A. de C.V. and Bestphone, S.A. de C.V.) filed before
Cofetel, different interconnection rates disputes against Telmex.



25







In 2009, MAXCOM and
Telmex executed different amendments to our interconnection agreements, establishing that if we do not reach an agreement regarding
the interconnection rates, both parties would request for a Cofetel resolution.



In 2011, Cofetel issued
several resolutions regarding the disputes between Telmex and LEC, reducing the interconnection rates, and established the following
rates per minute:



| | · | Interconnection
                                                                                                               (origin and termination):
                                                                                                               Ps 0.03951
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Long Distance
                                                                                                               transport (resell):
                                                                                                               Ps. 0.04530
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Local Transit:
                                                                                                               Ps. 0.01904
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



Cofetel has not issued
a resolution regarding the dispute filed by MAXCOM, however based on the non-discrimination conditions, MAXCOM during 2011, paid
the interconnection rates established by Cofetel for the other carriers.



MAXCOM is still waiting
for the Cofetel’s resolution regarding the interconnection rates dispute with Telmex, for the years 2011 and 2012. We believe
that the resolution will be in the same manner as the disputes between Telmex and the other LEC’s.



Furthermore, MAXCOM
is requesting the retroactive application of the interconnection rates with Telmex for the years 2009 and 2010.



In February 2012,
the Mexican Supreme Court of Justice resolved that the SCT does not have the authority to review the interconnection rates established
by Cofetel and ratified that Cofetel is the authority that should solved the interconnection tariffs disputes.



We considered that
this resolution does not imply any contingency, obligation or economic benefit for MAXCOM as the applicable rates for such period
must be resolved by Cofetel once again based on the applicable law.



Exchange
rate control rules enacted in the future could make it more difficult for us to service our U.S. dollar-denominated debt, raise
capital outside of Mexico and make capital expenditures.



In the past, the Mexican
government has issued exchange control rules that, although not in effect today, may be enacted in the future. If so enacted,
exchange control rules could make it more difficult to service our U.S. dollar denominated debt, raise capital outside of Mexico
and make capital expenditures.



The price of our securities
could decrease due to events in other countries, especially the United States and emerging market countries.



We cannot assure you
that the price of our securities will not be adversely affected by events elsewhere, especially in the United States and in emerging
market countries. Mexican financial and securities markets are, to varying degrees, influenced by economic and market conditions
in other countries. Although economic conditions are different in each country, investor reaction to developments in one country
has had and can have significant effects on the prices of securities of issuers in other countries, including Mexico. For example,
each of the 1997 Asian economic crisis, the 1998 Russian debt moratorium and currency devaluation, the 1999 Brazilian currency
devaluation and the 2001 Argentine debt default and currency devaluation triggered market volatility in Latin America. The economic
slowdown in the United States, the military conflict in Iraq, the threat of terrorism and political and financial crises in certain
emerging markets have had a significant negative impact on the financial and securities markets in many emerging market countries,
including Mexico.



Less information about
our Company may be publicly available because we are subject to different corporate disclosure and accounting standards than U.S.
companies.



A principal objective
of the securities laws of the United States and Mexico is to promote full and fair disclosure of all material corporate information.
However, there may be less publicly available information about foreign issuers of securities listed in the United States and
of Mexican issuers in Mexico than is regularly published by or about U.S. issuers of listed securities. In addition, we prepare
our consolidated financial statements in accordance with IFRS.



26







You may suffer
a U.S. dollar shortfall if you obtain a judgment against us.



In the event that
the outstanding holders of our senior notes are awarded a judgment from a Mexican court enforcing our U.S. dollar-denominated
obligations under our senior notes due 2014, we will have the right to discharge our obligations by paying to the outstanding
holders of our senior notes in pesos at the exchange rate in effect on the date of payment of such judgment. The exchange rate
is currently determined by the Central Bank of Mexico (Banco de México) every banking day in Mexico and published
the following banking day in the Official Gazette of the Federation (Diario Oficial de la Federación). As a result
of such currency conversion, you could face a shortfall in U.S. dollars. No separate actions exist or are enforceable in Mexico
for compensation for any such shortfall.



If we were to be declared
bankrupt, holders of our senior notes due 2014 may find it difficult to collect payment on the notes.



Under the Mexican
Bankruptcy Law (Ley de Concursos Mercantiles), if we or any of the guarantors of our senior notes due 2014 were declared
bankrupt (enquiebra)by a Mexican Court, or were to become subject to reorganization proceeding (concurso mercantil),
our obligations under the senior notes due 2014 and the applicable guarantor’s obligations under the guarantee of the senior
notes due 2014: (i) would be converted into pesos at the exchange rate published by the Central Bank of Mexico prevailing at the
time of the declaration of reorganization proceeding and then from pesos into Unidades de Inversión, or UDIs, inflation
indexed units and would not be adjusted to take into account any devaluation of the peso relative to the U.S. dollar occurring
after such conversion, (ii) would be subject to the outcome of, and priorities recognized in, the relevant proceedings, (iii)
would be satisfied at the time claims of all of our creditors are satisfied after the relevant proceedings have been substantially
advanced, (iv) would cease to accrue interest from the date a reorganization proceeding or bankruptcy is declared and, (v) would
be subject to certain statutory preferences including tax, social security and labor claims and claims of secured creditors.



Minority shareholders
may be less able to enforce their rights against us, our directors, or our controlling shareholders in Mexico.



Under Mexican law
and our bylaws which are governed by Mexican law, the protections afforded to minority shareholders are different from those afforded
to minority shareholders in the United States. For example, because provisions concerning fiduciary duties of directors have only
recently been incorporated into the Mexican Securities Market Law (Ley del Mercado de Valores)and are not as developed
as in the United States, it may be difficult for CPO holders to bring an action against directors for breach of this duty and
achieve the same results as in most jurisdictions in the United States. Procedures for class action lawsuits do not exist under
applicable Mexican law. Furthermore, if investors hold our securities through the CPO trustee, their minority rights may only
be exercised through instructions of the CPO trustee. Such indirect ownership arrangement may further limit such investor’s
rights. Therefore, it may be more difficult for CPO holders to enforce their rights against us, our directors, or our controlling
shareholders than it would be for minority shareholders of a U.S. company.



Investors may experience
difficulties in enforcing civil liabilities against us or our directors, officers and controlling persons.



We are organized under
the laws of Mexico, and most of our directors, officers and controlling persons reside outside the United States. In addition,
all or a substantial portion of our assets and our directors’ and officers’ assets are located outside the United
States. As a result, it may be difficult for investors to effect service of process within the United States on such persons or
to enforce judgments against them, including any action based on civil liabilities under the U.S. federal securities laws. There
is doubt as to the enforceability against such persons in Mexico, whether in original actions or in actions to enforce judgments
of U.S. courts, of liabilities based solely on the U.S. federal securities laws because Mexican courts may determine that the
obligation for which enforcement is sought contravenes or goes beyond Mexican law (and public policy (órden público)
thereunder).



27







The Recent Constitutional Bill Passed by the
Mexican Federal Congress may have an adverse effect on our business, results of operations and financial Condition.



The new telecommunications bill recently
passed by the President of Mexico and the Mexican Congress will amend the Mexican Federal Constitution with respect to the telecommunications
and broadcasting industries, seeking to strengthen competition and telecommunications authorities.



The bill provides for a number of other
measures, including eliminating the limit on foreign investment in fixed network operators, raising the limit on foreign investment
in broadcasters to 49%, providing for two new broadcasting licenses to be awarded by public auction, and providing for “must
carry” obligations for television service providers and “must offer” obligations for broadcasters.



Lifting foreign ownership restrictions
could result in increased competition in our market. Such competition may results in us reducing prices we can charge and may
lead to a loss in market share, which could have an adverse effect on our business, results of operations and financial condition.



The bill is likely to become effective
in substantially its current form, but its impact will depend on how it is implemented by further legislation and by the new Federal
Telecommunications Institute.



Risks Related to Our Liquidity



If we do not
raise additional capital, we may not be able to continue as a going concern.



On December 4, 2012, Maxcom entered into
a recapitalization agreement pursuant to which it would conduct and an exchange offer for its outstanding debts securities (the
“Debt Exchange Offer”) and concurrently Ventura Capital Privado S.A. de C.V. (“Ventura”) would conduct
a tender offer for Maxcom’s outstanding equity securities (the “Tender Offer”) and make a capital contribution
to Maxcom (the “Capital Contribution”). The Tender Offer and Capital Contribution were conditioned on, among other
things, the success of the Debt Exchange Offer. The Debt Exchange Offer was extended three times and expired on April 24, 2013
without the conditions to the offer having been satisfied and, as a result, Maxcom did not receive the Capital Contribution.



Our previously
released consolidated financial statements are presented on a going concern basis, which contemplates the realization of
assets and satisfaction of liabilities in the normal course of business. However, since the date of those financial
statements our operational and financial viability has further deteriorated due to our declining cash balance. As of March
31, 2013, our cash and temporary investment balance was Ps.102.9 million (U.S.$8.3 million). The notes due 2014, with an
outstanding principal balance of U.S.$200 million will mature on December 15, 2014. Without additional sources of capital, we
do not expect to be able to make the coupon payment due on June 15, 2013 with respect to the notes due 2014 and we may not be
able to meet other financial obligations as they come due. If this occurs, holders of the notes due 2014 and our other
creditors could commence involuntary bankruptcy proceedings against us in Mexico or in the United States. In addition, our
business is very capital intensive and there is a significant risk that we will not have the ability to make the necessary
investments in technology, infrastructure and maintenance of our network. Because the Debt Exchange Offer and the concurrent Tender Offer have not been consummated, Maxcom has not received the Capital Contribution. In light of this outcome,
Maxcom is considering all of its alternatives including, but not limited to, commencement of a Chapter 11 case or other
restructuring proceeding.



Based on the foregoing, our ability to
continue as a going concern would depends upon our ability to otherwise raise additional capital or restructure our capital structure.





A voluntary restructuring under Chapter
11 of the United States Bankruptcy Code, or other restructuring, could materially adversely affect our business and could result
in holders of our senior notes due 2014 and equity securities having their claims or interests significantly reduced, converted
into equity or eliminated.



A restructuring may
be protracted and contentious and disruptive to our business and could materially adversely affect our relationships with customers,
suppliers and employees who may terminate their relationships with us. A restructuring would also cause us to incur significant
legal, administrative and other professional expenses. No assurances can be given that any such restructuring will be successful
or that holders of our debt obligations or equity securities will not have their claims or interests significantly reduced, converted
into equity or eliminated. If a restructuring is not successful, we may be forced to liquidate our business and assets. Our board
of directors has approved the engagement of, and we have engaged, counsel to advise us on a Chapter 11 restructuring and authorized
preparatory activities related to a restructuring, including the negotiating of a plan support agreement and a Chapter 11 plan
term sheet with certain of the holders of our senior notes due 2014. A restructuring through Chapter 11, or otherwise, could have
a material adverse affect on the interests of holders of our debt and equity securities, including the potential cancellation or
diminution in value of such securities.



28







ITEM 4. INFORMATION
ON THE COMPANY



| | A. | History and development of the Company
| | -- | --------------------------------------



Maxcom Telecomunicaciones,
S.A.B. de C.V. is a limited liability public stock corporation (sociedad anónima bursátil de capital variable)
with indefinite life, organized under the laws of Mexico, incorporated on February 28, 1996. We were originally organized under
the name “Amaritel, S.A. de C.V.” We changed our legal name to “Maxcom Telecomunicaciones, S.A. de C.V.”
on February 9, 1999. In connection with our initial public offering, our corporate name was changed to “Maxcom Telecomunicaciones,
S.A.B. de C.V.” on October 19, 2007, when we adopted the form of a public company or limited liability public stock corporation
(sociedad anónima bursátil de capital variable). Our legal name is also our commercial name.



Our principal offices
are located at Guillermo González Camarena No. 2000, Colonia Centro de Ciudad Santa Fe, Mexico, D.F. 01210 and our general
phone number is (52) 55-5147-1111. Our website address, the contents of which are not part of, or incorporated into, this annual
report, is www.maxcom.com. Our agent in the United States is Puglisi & Associates, 850 Library Avenue, Suite 204, P.O. Box
885, Newark, Delaware 19715.



In February 1997,
we were awarded Mexico’s first competitive wireline local and long-distance telephony concession, covering the Federal District
of Mexico and over 100 cities and towns in the Gulf region for local service and the whole nation for long-distance service. This
concession has a term of 30 years. The local telephony portion of our concession was expanded in September 1999 to cover most
of the Greater Mexico City area and a wider area within the Gulf region. In September 2001, our concession was further expanded
to allow us to provide nationwide wireline local telephony service. In October 1997, we were awarded seven nationwide point-to-point
and three regional point-to-multipoint microwave concessions. Each of these concessions has a term of 20 years.



We commenced commercial
operations on May 1, 1999. We are currently offering local, long-distance, Internet, Voice over Internet Protocol services, public
telephony, paid TV, mobile services, other value-added services and data services in the cities of Mexico City, Puebla, Queretaro
and San Luis Potosi.



On October 24, 2007,
we completed a global initial public offering of 12,296,970 American Depositary Shares (ADSs) in the United States and 16,969,697
Ordinary Participation Certificates (Certificados de Participación Ordinarios “which we also refer to as
CPOs” for its initials in Spanish) in Mexico. Approximately 16% of the ADSs and the CPOs were sold by existing Maxcom shareholders.
Each ADS represents seven CPOs, while each CPO represents three Series “A” common shares.



In connection with
our initial public offering, each issued and outstanding share of our Series A, Series B and Series N common stock was converted
into one new share of Series A common stock. Upon completion of the conversion, which took place prior to the closing of the initial
public offering, we had 484,357,036 shares of Series A common stock issued and outstanding. The initial public offering resulted
in Maxcom receiving gross proceeds of approximately U.S.$260 million.



In accordance with
a report issued by The Bank Of New York, our depositary agent for the ADRs, as of April 30,2013, there were  2,862,278 ADSs
being traded in the New York Stock Exchange (which we refer to as the NYSE), under the symbol “MXT”. As of that date,
there were approximately 226,996,177 CPOs being traded in the BMV.



In 2012 and 2011,
we invested Ps.581.1 million (U.S.$44.7 million) and Ps.417.4 million (U.S.$33.7 million), respectively, in capital expenditures,
primarily for the build out and maintain  our infrastructure. In 2013, the company experienced a decline in cash flows and
cash balances, which may affect its liquidity. The company plans to address this situation by considering savings in capital expenditures,
looking for new investors and other restructuring proceedings.



29







| | B. | Business overview
| | -- | -----------------



Industry Overview



Mexico is the second
largest country in Latin America in terms of population, with approximately 114 million people, a gross domestic product of US$1,155
billion and a gross domestic product per capita of over US$10,000 as of December 31, 2011, one of the highest GDPs per capita
in Latin America.



The Mexican telecommunications
market, the second largest in Latin America, is expected to generate approximately U.S.$27,500 million in revenues in 2012 and
is forecast to grow at an compounded annual growth rate or CAGR of 3.4% over the next five years, to approximately U.S.$32,600
million in 2017, according to data from Pyramid. For 2012, income from fixed and mobile telecommunications services in Mexico
will amount to over U.S.$24,700 million, with the expectation of continued growth in the mobile sector and in the local, data
and internet segments of the fixed sector.



The fixed telecommunications
sector, which includes basic telephone services such as local and long distance calls as well as data and internet services, is
a very important part of the telecommunications industry in Mexico. For 2012, revenue from the fixed telecommunications sector
is expected to be approximately U.S.$8,834 million, or approximately 32% of the total telecommunications market in Mexico.



According to information
provided by Cofetel and by the National Institute of Statistics, Geography and Informatics of Mexico (Instituto Nacional de
Estadistica Geografía e Informatica), Mexico has relatively low wire line penetration compared to other countries in
Latin America. According to Pyramid, the level of penetration of narrow band access in Mexico is expected to be 18.6% for the
year 2012 and to decrease slightly in 2013 to 18.3%. Broadband penetration is estimated to grow from 11.4% in 2012 to 16.2% in
2017, and total fixed penetration is expected to be 30.0% in 2012 and to grow to 33.0% by 2017. It is expected that the total
number of broadband subscribers in Mexico will be approximately 13.1 million in 2012, and will grow to approximately 19.6 million
subscribers by 2017, representing an estimated annual growth rate of 8.5% from 2012 to 2017.



Market Liberalization



The Mexican telecommunications
market has long been dominated by Telmex, the former government owned telecommunications monopoly. However, since the Mexican
government completed the privatization of Telmex in 1990, the Mexican telecommunications sector has become increasingly open to
competition which has created an opportunity for competitive carriers to capture market share from Telmex.



On October 4, 2006,
the Federal government enacted a new directive known as the “Convergence Regulations,” (Acuerdo de Convergencia
de Servicios Fijos de Telefonia Local y Television y/o Audio Restringidos que se Proporcionan a través de Redes Publicas
Alambricas e Inalambricas). These regulations allow certain concessionaries of media and telecommunication services to provide
other services not included in their original concessions through voluntary adherence to the regulations. Upon compliance with
certain regulations, cable television providers are now allowed to provide voice and data services. Likewise, voice and data service
providers, such as us and Telmex, upon compliance with certain regulations, are now allowed to provide television services. In
addition, the Mexican government is allowing cable companies to act as “carriers of carriers” by providing bidirectional
data, Internet broadband services and voice services, including VoIP services. As a result, we face significant competition from
new entrants providing telephony services, including cable television providers.



Several companies
without legal authorization have begun to target the Mexican telecommunications market to offer telephone services through the
Internet. Moreover, although we provide paid television services in some of our service areas, we are uncertain about our ability
to provide these new services profitably due to the market penetration of current competitors providing similar services in such
areas.



Number portability
came into effect in Mexico enabling Mexican consumers and businesses to benefit from the added choice and convenience that number
portability provides, allowing subscribers to easily switch communications providers without the time, inconvenience and expense
associated with changing phone numbers. Portability is currently only possible from one fixed line network to another and from
one mobile network to another, but the transfer between fixed and mobile networks is still not possible.



30







Local Telephony Market



In connection with
the privatization of Telmex, the Mexican government granted Telmex a six-year implied monopoly over local telephony services,
which was eliminated in mid-1996 when the SCT published regulations governing the licensing of local services on a competitive
basis. In order to promote competition in the local telephony market, the Mexican government auctioned several concessions beginning
in 1997, including the regional concession awarded to us for wireline local telephony service which was later expanded to a nationwide
concession.



Each wireline local
telephony concession granted by the Mexican government generally has a 30-year term and can be extended at the request of the
concessionaire, subject to the approval of the SCT. Each concession authorizes, among others, the provision of local telephony
services and value-added services such as voice mail, call waiting, call forwarding, three-way calling and caller identification,
in specified regions of the country.



The Mexican government
also conducted auctions of the following spectrum frequencies:



| | · | 450 MHz, 1.9
                                                                                                               GHz (Personal Communications
                                                                                                               Services) and 3.4-3.7
                                                                                                               GHz (fixed wireless
                                                                                                               local loop) nationwide
                                                                                                               and regional frequency
                                                                                                               bands;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | 7, 15, 23 and
                                                                                                               38 GHz frequency
                                                                                                               bands for nationwide
                                                                                                               point-to-point
                                                                                                               microwave transmission
                                                                                                               links; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | 10.5 GHz frequency
                                                                                                               band for regional
                                                                                                               point-to-multipoint
                                                                                                               microwave transmission
                                                                                                               service.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In 1998, three companies
won nationwide concessions for fixed wireless local loop frequencies, although one later forfeited its right for failure to pay
concession fees. In addition, in 1997 six companies won concessions in the 1.9 GHz (Personal Communications Services) frequencies
on either a nationwide or regional basis, although one also forfeited its right for failure to pay concession fees. See “—
Mobile Telephony Market.”



In addition, the Mexican
government does not permit the unbundling of local loop frequencies, requiring all telephone companies wishing to offer local
telephone service to build their own last-mile connectivity to reach their targeted customers.



Long-Distance Telephony Market



In connection with
the privatization of Telmex, the Mexican government granted Telmex an exclusivity period of six years for long-distance telephony
services. In August 1996, the exclusivity period expired and competition commenced in January 1997. In order to promote competition
among domestic and international long distance providers, the Mexican government granted several concessions, including the national
concession awarded to us, for domestic and international long-distance services, as well as value-added services. Each concession
generally has a nationwide scope and a 30-year term which can be extended at the request of the concessionary, subject to the
approval of the SCT.



Other long-distance
concessionaires include, among others, (i) Axtel, (ii) Alestra, (iii) Bestel, S.A. de C.V. (“Bestel”), (iv) Iusatel,
S.A. de C.V. and (v) Marcatel, S.A. de C.V. (“Marcatel”). International liberalization trends will likely continue
to impact the flow of long-distance telephone traffic to and from Mexico. In particular, demand for long-distance services may
be inhibited by the increasing use of VoIP.



Mobile Telephony Market



The Mexican mobile
telephony market is divided into nine regions. The SCT divided the cellular telephony system in each region into the cellular
A-Band and cellular B-Band. Today, cellular A-Band concessions are owned by Telefonica Moviles, in cellular regions 1, 2, 3 and
4, and by Iusacell in cellular regions 5, 6, 7, 8 and 9. The main mobile telephony carriers in Mexico include:



31







| | · | Telcel with
                                                                                                               nationwide Personal
                                                                                                               Communications
                                                                                                               Services and cellular
                                                                                                               concessions;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Telefonica
                                                                                                               Moviles with nationwide
                                                                                                               Personal Communications
                                                                                                               Services and regional
                                                                                                               cellular (regions
                                                                                                               1through 4) concessions;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Iusacell with
                                                                                                               regional cellular
                                                                                                               (regions 5 through
                                                                                                               9) and nationwide
                                                                                                               Personal Communications
                                                                                                               Services concessions;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Unefon, S.A.B.
                                                                                                               de C.V., an affiliate
                                                                                                               of Iusacell, with
                                                                                                               a nationwide Personal
                                                                                                               Communications
                                                                                                               Services concession;
                                                                                                               and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Nextel, an
                                                                                                               affiliate of NII
                                                                                                               Holdings, Inc.,
                                                                                                               through enhanced
                                                                                                               specialized mobile
                                                                                                               radio licenses.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



According to Pyramid,
a well-known industry source, in 2012 mobile telephony penetration in Mexico reached 89% with 97.9 million mobile subscriptions.
Despite the existence of five main players in the market, Telcel holds a dominant position with 69.1% of total mobile subscribers.
In 2012, total mobile revenues grew 5.7%. The majority of the growth in the Mexican market has resulted from the prepaid segment,
which accounted for 84% of the total mobile subscriber base at the third quarter of 2012 according to Cofetel. We believe wireless
tariffs in the Mexican market continue to be relatively high when compared to international standards.



Our Company



We are an integrated
telecommunication services operator providing widespread voice and data services to residential and small- and medium-sized business
customers in four metropolitan markets in Mexico and selected service in other markets. Since our inception in 1996, we have targeted
the residential and business customer segments which we believe have been underserved by the local telephone incumbent and other
competing telecommunications providers. We provide, individually, and in bundles, a wide range of services including local and
long-distance voice, data, high speed, dedicated and dial-up Internet access, public telephony and Voice over Internet Protocol
telephony. We also offer mobile voice service through resale and capacity leasing agreements with third parties.



We operate our own
telecommunications network and support infrastructure, including the critical “last mile,” or customers’ premise
level infrastructure (modems, handsets and set-up boxes), which allows us to control the quality of the user experience and adapt
our service offerings to meet market demand.



We believe the combination
of innovative, bundled offerings, competitive pricing and dedicated customer service provides value for our customers, and has
allowed us to achieve significant growth from 125,231 voice lines in service as of December 31, 2002, to 347,804 as of December
31, 2012, representing a compound annual growth rate of17.8%.



We have a history
of being the first provider in Mexico to introduce new services, including:



| | · | the
                                                                                                               first commercial
                                                                                                               digital subscriber
                                                                                                               line broadband
                                                                                                               offering in 2005,
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               first “triple−play”
                                                                                                               (or cable, voice
                                                                                                               and broadband)
                                                                                                               offering to residential
                                                                                                               customers through
                                                                                                               a revenue−sharing
                                                                                                               agreement with
                                                                                                               cable television
                                                                                                               companies in 2005,
                                                                                                               and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               first unbundled
                                                                                                               “quadruple−play”
                                                                                                               by adding mobile
                                                                                                               services to our
                                                                                                               bundled “triple−play”
                                                                                                               offering as a Mobile
                                                                                                               Virtual Network
                                                                                                               Operator (“MVNO”)
                                                                                                               with Pegaso PCS,
                                                                                                               S.A. de C.V. on
                                                                                                               September 5, 2007.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, in August
2007, we launched paid TV services over our copper network using Internet protocol (“IP”), representing the first
Internet protocol television (“IPTV”) offering in Mexico.



32







We operate in selected
metropolitan areas that we believe offer opportunities for growth in telecommunications use through a combination of a concentrated
population, low subscriber line penetration, potential expenditure in telecom services per customer and economic growth. We currently
offer residential and business services in the cities of Puebla, Mexico City, Queretaro, San Luis Potosi and Tehuacan. We focus
our development efforts on a small number of large cities where we seek to achieve strong penetration to capture operating efficiencies
through a combination of network density and economies of scale. As of December 31, 2012, in areas covered by our network where
we own the last mile infrastructure, we have achieved penetration levels (measured by homes passed) of 30% in the city of Puebla,
30% in Mexico City, 24% in the city of Queretaro, 22% in the city of San Luis Potosi and 17% in the city of Tehuacan. Assuming
that adequate capital is available to us, we believe our business model is replicable in other cities and other urban markets
which have favorable demographics and economic conditions.



We reach our customers
with efficient technology, using a combination of fiber optic cable, broadband−capable copper wire and microwave transmission
technology. Since we began construction of our network in 1998, we have employed reliable technology from world class providers,
primarily Alcatel–Lucent, capable of providing a wide range of value−added services, including broadband and video.
We regularly analyze technological developments and strive to incorporate the most capital efficient network technology available
to satisfy our customers’ requirements. We build our telecommunications networks in each city by initially installing centralized
equipment, fiber optics and then adding last−mile network infrastructure in a modular fashion through our individual network
“clusters” (under-penetrated city areas with the largest potential for new lines) that strategically target individual
neighborhoods, business areas and new residential developments. This approach enables us to adapt our network expansion plans,
rapidly increase service in a given area and reduce the time between our incurrence of capital expenditures and generation of
revenues. This approach also allows us to match our locally−oriented sales efforts, which are primarily conducted by our
door-to-door sales force, to our network modules, or cluster builds, so as to maximize the degree and speed of penetration of
new areas in which we expand.



As of December 31,
2012, our network encompasses 1,339 kilometers of metropolitan fiber optic cable and over 4,718 kilometers of high−quality
copper loops capable of high speed data transmission. We have four state−of−the−art Lucent Technologies 5ESS
switches in service, located in Mexico City (two switches), Puebla and Queretaro, and two softswitches, one Alcatel A5020 located
in Mexico City and one Nortel CSK2 located in Monterrey. We also operate a 170−kilometer fiber optic link connecting Puebla
and Mexico City and a 5,915 kilometer long haul fiber optic backbone connecting Mexico City and Laredo, Texas, allowing us to
have points of presence in the United States that allow us to sell data solutions to customers, thereby reducing their cost of
Internet services. We have a point−to−point concession in the 15 GHz and 23 GHz frequency bands forming a complex
microwave network through the cities of Mexico City, Puebla, Queretaro and San Luis Potosi, in which we currently operate. This
complex microwave network also passes through the cities of Aguascalientes, Guadalajara, Leon, Monterrey and Toluca, in which
we intend to expand our offering and footprint to allow us to obtain additional customers. We also have a point−to−multipoint
concession in the 10.5GHz frequency band, covering telecommunications regions 3, 5 and 8 (North, Gulf and South East) of Mexico.



For the year ended
December 31, 2012, we invested Ps.581.1 million (U.S.$44.7 million) in capital expenditures, primarily for the maintenance of
our infrastructure.



We manage all aspects
of the service offering to our customers, including installation, provisioning, network monitoring and management, proactive trouble
ticket management and billing. Since we control our entire network and are not dependent on the local telephone incumbent for
local loops, we are able to manage the speed of our service initiation and ensure the quality of our service offerings. We have
a customer retention program that includes a customer service call center open Monday thru Friday from 8 am to 10 pm / Saturday
& Sunday from 9 am to 9 pm; a technical customer service call center open 24 hours a day, seven days a week and a dedicated
customer retention team. We believe our customers place high value on, among other things, competitive pricing, quality of service
and accurate billing.



We believe that the
combination of our ability to offer high quality bundled offerings at competitive prices, our position as a customer service-oriented
provider, our locally focused modular network construction strategy, our focus on quality and reliability and our state-of-the-art
network and systems will allow us to benefit from the expected growth of the Mexican telecommunications industry.



33







Competitive Strengths



Our business is characterized
by the following strengths:



We offer local and
long−distance wireline voice telecommunications service and dial−up and broadband digital subscriber line Internet
access throughout our service areas, and in August 2007, we launched our multichannel IP video service in Puebla, entirely on
our own network. We offer these services separately and in bundles including a “triple−play” of voice, broadband
Internet and video. We also offer an unbundled “quadruple−play,” which includes mobile services, through an
MVNO agreement with Grupo de Telecomunicaciones Mexicana, S.A. de C.V. (“Telefonica Moviles”). We have a history of
being the first provider in Mexico to introduce new services. In 1997, we were the first carrier to obtain competitive wireline
local and long−distance telephony concessions.



In 2001, we were the
first in Mexico to offer digital subscriber line and to offer VoIP over hybrid fiber coaxial networks. In 2005, we were the first
telecommunication carrier in Mexico authorized to provide “triple−play” services through a joint venture with
a cable operator and in January 2007 we provided the “triple play” through our own network. We were the first telecommunication
carrier in Mexico authorized to provide “quadruple−play” services by the addition of IPTV and mobile services
to our residential portfolio in 2007. In addition, in 2012 we launched an “over-the-top” (“OTT”) IPTV
service operating through third party broadband Internet access service, which allows us to expand to new market segments at a
lower cost to our customers.



History of High Penetration Rates.



Our business model
is based on careful geographical targeting of certain underserved segments of the residential and business population in urban
markets. Our network “cluster” build-outs are executed in tandem with sales and promotional efforts to sign up customers
prior to or immediately after offering service in each cluster. As of December 31, 2012, in areas covered by our network where
we own the last mile infrastructure, we have achieved landline penetration levels (measured by homes passed) of 30% in the city
of Puebla, 30% in Mexico City, 24% in the city of Queretaro, 22% in the city of San Luis Potosi and 17% in the city of Tehuacan.



These penetration
levels allow us to capture operating efficiencies through a combination of network density and economies of scale. As a result
of our strategy, we have subscribers for approximately 58% of built lines in our network clusters within 180 days after the completion
of the build-out.



Cost Efficient
and Flexible, Reliable Technology.



We deploy our network
and service our customers’ needs in a cost−efficient manner. We combine fiber optic, copper lines and microwave technology
which we deploy for specific customers or areas based on customer requirements, deployment cost, time to market, time to revenue
and profitability potential. Our network uses fiber optic trunks and heavy gauge copper loops, most of which do not exceed 3 kilometers
in length which provide us with the capability to deliver broadband data at speeds of up to 20 Mbps. The flexibility of our network
allows us to provide value−added services such as video without major outside plant upgrades. We use reliable and widely
used technology for our voice, data and IPTV services such as Centrex and Asymmetric Digital Subscriber Line (“ADSL”),
which, we believe, ensures the reliability of our network.



Valuable Last-Mile
Ownership.



Current Mexican telecommunications
regulations do not require Telmex, the wireline incumbent, to provide other telecom carriers with access to its unbundled local
loops. This has presented a significant barrier to entry for other telecommunications service providers. We built our own last-mile
infrastructure and own in excess of 4,718 kilometers of broadband-capable copper wire that passes by approximately one million
homes, connecting a majority of our end users to our fiber network and switches. As a result, we are not dependent on other telecommunications
carriers for last mile connectivity to reach our customers. Our broadband−capable last−mile infrastructure provides
flexibility to offer additional value−added services in certain clusters and we expect will enable our product offerings
to evolve with future market shifts and technology trends. Upon acquiring additional capital, we intend to expand our last mile
infrastructure and value-added service offerings. For more information on last-mile connectivity, see “Business––Property,
Plant and Equipment––Our Network––Last-mile Connectivity.”



34







Recognized Brand
Name and Customer Perception for Quality Services.



Because we control
the entire process of network provisioning, service initiation and service quality, we are able to ensure the quality of our service
and maintain customer loyalty. We believe we have been able to achieve high customer satisfaction that has allowed us to gain
new customers and retain our existing customers.



We constantly monitor
our customer satisfaction levels through surveys and utilize this information to enhance the quality of our services and the experience
for our customers. As a result, we have been able to reduce our churn rate from 2.6% as of December 31, 2008 to 1.9% as of December
31, 2012. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations––Factors
Affecting Our Results of Operation––Customer attrition (churn).”



History of Developing
Strategic Alliances.



We have a track record
of developing strategic alliances through revenue sharing agreements, capacity leasing, resale arrangements and business relationships
with mobile wireless operators, technology suppliers and real estate developers that allow us to expand our product offerings,
ensure compatible network technologies and gain access to new customers. We also provide unbundled wireless services as part of
the “quadruple−play” through our MVNO agreement with mobile operator Telefonica Moviles. In addition, we pre−install
communications services for new residential developments by joining forces with real estate developers who facilitate our access
to install new infrastructure in new residential communities.



Business Strategy



Our growth strategy
includes the following components:



Increase Penetration
of Niche Markets with Unmet Demand for Telecommunication Services.



We intend to continue
to focus on residential customers and small−, medium− and large−sized business customers in selected metropolitan
areas that offer telecommunications growth potential due to a combination of a large population, low subscriber penetration and
economic growth. We believe there is unmet demand for wireline, telephony, broadband, Internet and pay television services, especially
among the lower and middle−low income socioeconomic classes. According to “Asociacion Mexicana de Agencias deInvestigacion–AMAI”
the lower and middle−low income socioeconomic classes represent approximately 61% of Mexico’s households in 2011.



According to Pyramid
our penetration rate was 1.7% in telephony, 0.5% in pay television and 1.2% in Internet access in 2012 in Mexico.



Seize Wireline
Opportunity Created by Highly Priced Wireless Offering.



Mobile wireless penetration
in Mexico is approximately 89%, nearly triple the penetration rate of wireline telephony, according to the Mexican Federal Telecommunications
Commission (Comision Federal deTelecomunicaciones,or “Cofetel”). Based on average call duration of five minutes,
current per−minute pricing of prepaid wireless services used by 84% of Mexican mobile users according to Cofetel is over
ten times that of wireline. While wireless service has served as the introduction of many Mexicans to the telecommunications network,
we believe the high per−minute price of wireless services combined with the socio−demographic characteristics of Mexico,
including an average of 3.9 family members per household, have generated significant untapped demand in Mexican households and
businesses for a wired offering at lower prices. We intend to capitalize on this trend by continuing to offer high quality and
integrated fixed−line services at competitive prices.



Expand Tailor-made
Solutions to Business Customers.



We also focus on small−
and medium−sized business customers which contributed to approximately 52% of Mexican GDP and employed approximately 72%
of the total employees in the country in 2012. This group increasingly requires reliable integrated voice, data and managed services
which we can provide with tailor−made solutions to meet their specific needs.



35







Expand Our Network
on a Disciplined Demand−Driven, Modular Basis.



As part of our growth
strategy, we intend to continue building our network on a carefully targeted, modular basis with a rigorous focus on return on
investment. We expand our networks in each city based on identified customer demand in specific local areas, which we refer as
“clusters.” We execute network build-out in tandem with sales and promotional efforts targeted at customers in the
cluster. We also construct our network on a customer demand basis to support small− and medium sized business customers
in buildings or locations other than clusters. We refer to these locations as “single sites.” The clusters, single
sites and potential build-outs we identify compete internally for capital expenditure funds based on expected profitability and
return on investment.



Enhance Residential
Penetration Rates and Average Revenue per User through Bundling.



We launched Mexico’s
first multichannel IPTV service over our own network in Puebla. Our service uses broadband internet access with ADSL technology
to provide digital television allowing our customers to select from over 133 video channels of content with instantaneous channel
changes, interactive programming guide, video on demand content and digital video recording (“DVR”) option for premium
customers.



We believe that our
digital television offerings will allow us to sell video subscriptions to non−customers that are already passed by our networks,
which would increase our overall penetration. We also expect to sell video service bundles to a substantial percentage of our
existing telephony and Internet subscribers, increasing our revenue per customer. We believe that bundled services increase the
use of multiple services, enhance margins and lower churn.



Maintain Our
Service Quality Differentiation and Focus.



We provide a differentiated
customer experience based on high service quality and customer-focused product offerings. Key elements of our differentiation
strategy include proactive marketing efforts with door-to-door personal sales and promotions, competitive pricing, fast and affordable
installation and tailor made solutions for small- and medium-sized business customers. We also differentiate our services by providing
accurate and timely billing, minimizing activation errors and delivering near real-time activations and disconnections. Our billing
systems provide us with the ability to combine all of the services provided to our customers in a convenient single invoice.



Our Products



In addition to our
innovative reliable product offering and high quality customer service, our pricing is typically at a modest discount to the levels
charged by Telmex and other competitors for comparable services. The following are the service products we currently offer to
our customers.



For the residential
market we have the following products:



| | · | LineaMax
                                                                                                          Residencial.This
                                                                                                          service provides a high-quality
                                                                                                          wireline telephone line
                                                                                                          with value-added features
                                                                                                          available, including
                                                                                                          voice mail, call waiting,
                                                                                                          call forwarding, three-way
                                                                                                          calling, call blocking,
                                                                                                          speed dialing and unlisted
                                                                                                          numbers.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Larga
                                                                                                          Distancia Max.This
                                                                                                          product provides domestic
                                                                                                          and international long-distance
                                                                                                          services to our local
                                                                                                          telephony customers
                                                                                                          who require long-distance
                                                                                                          service. Approximately
                                                                                                          97% of our local telephony
                                                                                                          customers also subscribe
                                                                                                          to Larga Distancia Max.
                                                                                                          We do not offer our
                                                                                                          long-distance service
                                                                                                          separately from our
                                                                                                          local telephony service.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | CentralMax.This service provides
                                                                                                          customers in residential
                                                                                                          developments with all
                                                                                                          of the functions of
                                                                                                          a private branch exchange
                                                                                                          using centrex technology
                                                                                                          (central functionality
                                                                                                          for simulating a private
                                                                                                          branch exchange), without
                                                                                                          having to acquire and
                                                                                                          maintain equipment.
                                                                                                          It also allows customers
                                                                                                          to communicate with
                                                                                                          the common areas of
                                                                                                          the development with
                                                                                                          four-digit internal
                                                                                                          calling. The features
                                                                                                          offered under this product
                                                                                                          include call waiting,
                                                                                                          call forwarding, three-way
                                                                                                          calling, direct inward
                                                                                                          dialing, direct outward
                                                                                                          dialing, intercom dialing,
                                                                                                          call transfer, speed
                                                                                                          dialing, call hold,
                                                                                                          call pick up, outgoing
                                                                                                          call blocking and distinctive
                                                                                                          ringing.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



36







| | · | I-line.
                                                                                                          This is our VoIP service,
                                                                                                          which uses an analog-to-digital
                                                                                                          telephone adapter to
                                                                                                          allow any conventional
                                                                                                          telephone to access
                                                                                                          the telephone network
                                                                                                          through any broadband
                                                                                                          connection around the
                                                                                                          world.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Internet
                                                                                                          Max.This service
                                                                                                          uses a traditional telephone
                                                                                                          line and modem to provide
                                                                                                          dial-up Internet access
                                                                                                          at speeds of up to 56
                                                                                                          Kbps. We provide this
                                                                                                          service to customers,
                                                                                                          regardless of whether
                                                                                                          they have a telephone
                                                                                                          line with us.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | SpeediMax
                                                                                                          (ADSL).This is
                                                                                                          our broadband Internet
                                                                                                          access service with
                                                                                                          speeds of 128, 256,
                                                                                                          512 Kbps, 1Mbps, 2 Mbps,
                                                                                                          4Mbps and 8Mbps using
                                                                                                          ADSL transmission technology
                                                                                                          over ordinary telephone
                                                                                                          lines.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | AsistelMax.
                                                                                                          This service provides
                                                                                                          basic telephone medical
                                                                                                          and home assistance
                                                                                                          to our residential customers
                                                                                                          in case of emergency.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Pay
                                                                                                          TV services.This
                                                                                                          service provides digital
                                                                                                          television content to
                                                                                                          our residential customers
                                                                                                          over our copper network
                                                                                                          using IP including value
                                                                                                          added features such
                                                                                                          as video on demand,
                                                                                                          DVR and interactive
                                                                                                          programming guide.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | MaxcomCel:This is our residential
                                                                                                          mobile communication
                                                                                                          service, which is provided
                                                                                                          through a cellular network.
                                                                                                          This postpaid service
                                                                                                          is only available for
                                                                                                          our existing customers.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | STB
                                                                                                          Off-Net:This is
                                                                                                          our IPTV service which
                                                                                                          provides a mix of 53
                                                                                                          live TV channels and
                                                                                                          subscription video on
                                                                                                          demand services.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Yuzu:This service provides
                                                                                                          live TV and video on
                                                                                                          demand service provided
                                                                                                          over the Internet, accessible
                                                                                                          at any time and compatible
                                                                                                          with different connectivity
                                                                                                          devices such as smart
                                                                                                          phones, tablets and
                                                                                                          personal computers,
                                                                                                          among others.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For the commercial
market, our product portfolio includes:



| | · | LineaMax
                                                                                                          Comercial.This
                                                                                                          service is identical
                                                                                                          to Linea Max Residencial,
                                                                                                          except that it also
                                                                                                          includes multiline hunting.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | CentralMax.This service provides
                                                                                                          business customers with
                                                                                                          all of the functions
                                                                                                          of a private branch
                                                                                                          exchange using centrex
                                                                                                          technology, without
                                                                                                          having to acquire and
                                                                                                          maintain equipment.
                                                                                                          The features offered
                                                                                                          under this product include
                                                                                                          four-digit internal
                                                                                                          calling, call waiting,
                                                                                                          call forwarding, three-way
                                                                                                          calling, direct inward
                                                                                                          dialing, direct outward
                                                                                                          dialing, intercom dialing,
                                                                                                          call transfer, speed
                                                                                                          dialing, call hold,
                                                                                                          call pick up, outgoing
                                                                                                          call blocking, single
                                                                                                          digit access to attendant
                                                                                                          and distinctive ringing.
                                                                                                          Optional solutions include
                                                                                                          voice mail, music-on-hold,
                                                                                                          multi-line hunting and
                                                                                                          operator services.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | TroncalMax
                                                                                                          Digital.This service
                                                                                                          provides digital trunks
                                                                                                          for business customers
                                                                                                          that need highly reliable
                                                                                                          access to and from the
                                                                                                          public telephone network
                                                                                                          through their existing
                                                                                                          private branch exchange.
                                                                                                          This service is sold
                                                                                                          in groups of 10, 20
                                                                                                          or 30 trunks. The groups
                                                                                                          can be configured with
                                                                                                          direct inward dial,
                                                                                                          direct outward dial,
                                                                                                          caller identification
                                                                                                          or main telephone number
                                                                                                          assignments.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



37







| | · | TroncalMax
                                                                                                          Analogica.This
                                                                                                          service provides business
                                                                                                          customers with connectivity
                                                                                                          to their analog private
                                                                                                          branch exchange or key
                                                                                                          systems. The features
                                                                                                          available with this
                                                                                                          product are multi-line
                                                                                                          hunting, caller identification
                                                                                                          and call barring.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | TroncalSip.This service provides
                                                                                                          sip trunks (Session
                                                                                                          IP) for business customers
                                                                                                          that need highly reliable
                                                                                                          access to and from the
                                                                                                          public telephone network
                                                                                                          through their existing
                                                                                                          IP private branch exchange.
                                                                                                          This service can be
                                                                                                          delivered through our
                                                                                                          Internet Dedicated Access
                                                                                                          or a third party provider.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Hosted
                                                                                                          Contact Center.This
                                                                                                          service provides virtual
                                                                                                          agents infrastructure
                                                                                                          through our outsourcing
                                                                                                          model to deliver software
                                                                                                          licenses and Troncal
                                                                                                          Sip sessions to customers
                                                                                                          that needs extra call
                                                                                                          agents. This services
                                                                                                          is oriented to call
                                                                                                          center that needs virtual
                                                                                                          infrastructure with
                                                                                                          no investment an gives
                                                                                                          them flexibility and
                                                                                                          scalability to grow
                                                                                                          their campaigns on demand.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Hosted
                                                                                                          Private Branch Exchange.This service provides
                                                                                                          our business customers
                                                                                                          with all of the functions
                                                                                                          of an IP private branch
                                                                                                          exchange using VoIP
                                                                                                          technology, without
                                                                                                          having to acquire and
                                                                                                          maintain expensive equipment.
                                                                                                          The features offered
                                                                                                          under this service include
                                                                                                          those of Central Max
                                                                                                          as well as other IP
                                                                                                          enhanced services such
                                                                                                          as web portal setup,
                                                                                                          “click to dial,”
                                                                                                          hosted directory and
                                                                                                          Microsoft Outlook integration.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | I-line.This is our VoIP
                                                                                                          service, which uses
                                                                                                          an analog-to-digital
                                                                                                          telephone adapter to
                                                                                                          allow any conventional
                                                                                                          telephone to access
                                                                                                          the telephone network
                                                                                                          through a customer’s
                                                                                                          broadband connection.
                                                                                                          We market this service
                                                                                                          to customers who make
                                                                                                          and receive a significant
                                                                                                          volume of international
                                                                                                          and domestic long-distance
                                                                                                          calls. This service
                                                                                                          includes additional
                                                                                                          voice features such
                                                                                                          as call waiting, caller
                                                                                                          identification and voice
                                                                                                          mail.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | MaxcomCel:This is our business
                                                                                                          mobile communication
                                                                                                          service, which is provided
                                                                                                          through a cellular network.
                                                                                                          This postpaid service
                                                                                                          is only available for
                                                                                                          our existing customers.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | 1-800
                                                                                                          Numbers.This service
                                                                                                          is available to our
                                                                                                          customers interested
                                                                                                          in receiving toll-free
                                                                                                          calls into their call
                                                                                                          centers or businesses
                                                                                                          for domestic and international
                                                                                                          toll free services.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | SpeediMax.This is our broadband
                                                                                                          Internet access service
                                                                                                          for small businesses
                                                                                                          with speeds of 128,
                                                                                                          256 and 512 Kbps and
                                                                                                          also 1Mbps, 2Mbps, 4Mbps
                                                                                                          and 8Mbps using ADSL
                                                                                                          transmission technology
                                                                                                          over ordinary telephone
                                                                                                          lines. An ADSL provides
                                                                                                          a secure, dedicated
                                                                                                          link to the Internet
                                                                                                          or a company’s
                                                                                                          internal data network.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Dedicated
                                                                                                          Internet Access.This
                                                                                                          service offers Internet
                                                                                                          access at high speed
                                                                                                          within a clear channel
                                                                                                          access to the Internet
                                                                                                          backbone.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Digital
                                                                                                          private lines.This
                                                                                                          service provides highly
                                                                                                          reliable dedicated circuits
                                                                                                          between two or more
                                                                                                          physical locations.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | E-Security.This service provides
                                                                                                          managed security including
                                                                                                          perimetral anti-virus,
                                                                                                          content filter and spyware
                                                                                                          solutions. We supply
                                                                                                          all of the software
                                                                                                          and hardware equipment
                                                                                                          as an integrated solution
                                                                                                          for our customers.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | SOSMax.This service provides
                                                                                                          preventive and corrective
                                                                                                          maintenance to our customers’
                                                                                                          IT equipment.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Managed
                                                                                                          Servers.It provides
                                                                                                          Dedicated Servers according
                                                                                                          to customers’
                                                                                                          needs. The service provides
                                                                                                          configurations in different
                                                                                                          versions of Windows,
                                                                                                          Linux and Solaris operating
                                                                                                          systems. The service
                                                                                                          features redundant power:
                                                                                                          generators, UPS, PDU,
                                                                                                          fire detection and extinction,
                                                                                                          temperature and humidity
                                                                                                          control systems, physical
                                                                                                          and logical security
                                                                                                          monitoring, interconnections
                                                                                                          to Internet backbone
                                                                                                          and technical support
                                                                                                          24x7.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



38







| | · | Managed
                                                                                                          Backup. Backup and
                                                                                                          Restore services provide
                                                                                                          safe data storage in
                                                                                                          heterogeneous environments,
                                                                                                          adapting to the increasing
                                                                                                          demand of customer information.
                                                                                                          The platform for data
                                                                                                          backup and recovery
                                                                                                          is provided through
                                                                                                          a dedicated high speed
                                                                                                          fibre channel network
                                                                                                          (SAN), in a centralized
                                                                                                          manner.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Managed
                                                                                                          Storage. This service
                                                                                                          provides on-demand data
                                                                                                          storage capacity. Our
                                                                                                          Storage solutions provide
                                                                                                          either NAS (Network
                                                                                                          Attached Storage) or
                                                                                                          SAN (Storage Area Network)
                                                                                                          with high availability,
                                                                                                          performance, compatibility
                                                                                                          and scalability for
                                                                                                          mission critical customer
                                                                                                          applications
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Managed
                                                                                                          Tape Storage. Managed
                                                                                                          Tape Storage services
                                                                                                          allow our customers
                                                                                                          to store large volumes
                                                                                                          of information, offering
                                                                                                          the necessary space
                                                                                                          and security for their
                                                                                                          backup in order to have
                                                                                                          it always available
                                                                                                          and easy to recover
                                                                                                          when required. Tapes
                                                                                                          are either stored in
                                                                                                          an off-site location
                                                                                                          or kept inside the Data
                                                                                                          Center or sent to our
                                                                                                          customer’s sites.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Business
                                                                                                          Continuity Center.
                                                                                                          This service provides
                                                                                                          workstation positions
                                                                                                          inside the data center's
                                                                                                          premises, providing
                                                                                                          telephony, PC, printers
                                                                                                          and internet access,
                                                                                                          all available to be
                                                                                                          used by our customers
                                                                                                          in case of contingencies
                                                                                                          at their operating offices.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Co-location
                                                                                                          Services. Managed
                                                                                                          Colocation services
                                                                                                          provide all the services
                                                                                                          of basic infrastructure
                                                                                                          necessary to operate
                                                                                                          IT, communications and
                                                                                                          security equipment or
                                                                                                          any other device in
                                                                                                          a high-availability
                                                                                                          data center. The service
                                                                                                          features redundant power:
                                                                                                          generators, UPS, PDU,
                                                                                                          fire detection and extinction,
                                                                                                          temperature and humidity
                                                                                                          control systems, physical
                                                                                                          and logical security
                                                                                                          monitoring, optional
                                                                                                          interconnections to
                                                                                                          Internet backbone and
                                                                                                          technical support 24x7.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Managed
                                                                                                          Firewall. This service
                                                                                                          provides control of
                                                                                                          the perimeter customers’
                                                                                                          network access through
                                                                                                          either a physical or
                                                                                                          virtual device that
                                                                                                          it integrates Firewall
                                                                                                          and VPN functionality.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Virtual
                                                                                                          Servers.This service
                                                                                                          enable our clients count
                                                                                                          with Virtual Server
                                                                                                          resources using predefined
                                                                                                          templates, for the execution
                                                                                                          of their applications
                                                                                                          in a highly available
                                                                                                          environment. The service
                                                                                                          includes the licensing
                                                                                                          of operating systems.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Backup
                                                                                                          Online. This service
                                                                                                          provides remote backup
                                                                                                          for laptops, desktops
                                                                                                          or servers via a software
                                                                                                          agent and an internet
                                                                                                          access. Backups are
                                                                                                          performed with robust
                                                                                                          infrastructure in our
                                                                                                          high availability datacenter.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Lync.offers optimized
                                                                                                          communications through
                                                                                                          instant messaging and
                                                                                                          collaboration tools.
                                                                                                          It includes VoIP software,
                                                                                                          Web, audio and video
                                                                                                          conference, and instant
                                                                                                          messaging for companies
                                                                                                          without the need to
                                                                                                          invest in costly IT
                                                                                                          infrastructure or network
                                                                                                          updates.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Sharepoint.Sharepoint services offer: Creation of Intranet Portals, Administration of files, and documents, Collaboration, Social networks,
Extranets, Web sites,	Searches on the Intranet, Business Intelligence (reports), Integration of processes, Automation of workflows.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Bulk
                                                                                                          Short Message Service
                                                                                                          (SMS).This service
                                                                                                          is a web-based service
                                                                                                          for bulk-messaging to
                                                                                                          mobile phones via short
                                                                                                          message service (“SMS”),
                                                                                                          allowing our customers
                                                                                                          to upload and distribute
                                                                                                          mass SMS marketing messages
                                                                                                          for texting to mobile
                                                                                                          users.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We believe that our
products will help us benefit from the significant growth expected for data applications in Mexico and help us increase our participation
in the small- and medium-sized business market. In particular, we believe that the combination of voice and data services constitutes
an attractive set of products for those business customers enabling us to compete more effectively in such a market.



39







Pricing



We generally seek
to maintain very competitive prices. We offer pricing plans that are simple in order to assure customers of the integrity of our
billing process. We also provide discounts to high-usage customers that are likely to generate a significant outflow of calls.
Our residential pricing offerings range from a low monthly rent option with some calls included to an all-inclusive option including
unlimited local calls, long-distance and mobile minutes, broadband Internet access and customers’ premises equipment for
a fixed monthly fee. For our business customers, our pricing offerings range from a per-minute charge to unlimited local usage.
We pay interconnection charges to other carriers on a per-minute basis. However, the common practice in the Mexican retail market
is to charge customers on a per-call basis for local service. We seek to minimize the risk associated with this mismatch between
our revenues and costs and therefore, in some cases, have implemented a per-minute charge plan for long holding time customers
to be consistent with our interconnection fees that are on a per-minute basis.



Revenue Composition



Our management uses
information such as revenue by division to evaluate performance, make general operating decisions and allocate resources. The
following table sets forth our revenues for the periods indicated below. No interdivision revenues are applicable for the periods
presented here in.



|                 |  | Year Ended December 31 |        
|---------------- |  | ---------------------- | -------
|Segments*        |  | 2012                   |        
|                 |  |                        |        
|Residential      |  | Ps.                    | 1,003.5
|Business         |  |                        | 632.0  
|Public Telephony |  |                        | 174.9  
|Wholesale        |  |                        | 374.1  
|Other Revenue    |  |                        | 16.7   
|Total Revenues   |  | Ps.                    | 2,201.2










| | * | The above segments are comprised of homogeneous
                                                         customers.
| | - | -------------------------------------------------------------------------------------------------------------------



The distribution by
geographical location of revenue for the years ended December 31, 2012 and 2011 is as follows:



|2012                           |  |                   |         |  |               |     |       |       |  |     |       | 
|------------------------------ |  | ----------------- | ------- |  | ------------- | --- | ----- | ----- |  | --- | ----- | 
|Services                       |  | Metropolitan Area |         |  | Central South |     |       | North |  |     | Total | 
|                               |  | (In millions)     |        
|Local                          |  | Ps.               | 1,084.4 |  |               | Ps. | 616.2 |       |  | Ps. | 10.0  | 
|Long Distance                  |  |                   | 201.5   |  |               |     | 186.8 |       |  |     | 46.4  | 
|Rent of dedicated links        |  |                   | 0.2     |  |               |     | —     |       |  |     | —     | 
|Sale of equipment to customers |  |                   | 12.9    |  |               |     | 2.0   |       |  |     | —     | 
|Capacity Leasing               |  |                   | 40.8    |  |               |     | —     |       |  |     | —     | 
|Total Revenues                 |  | Ps.               | 1,339.8 |  |               | Ps. | 805.0 |       |  | Ps. | 56.4  | 



40







|2011                           |  |                   |         |  |               |     |       |       |  |     |       | 
|------------------------------ |  | ----------------- | ------- |  | ------------- | --- | ----- | ----- |  | --- | ----- | 
|Services                       |  | Metropolitan Area |         |  | Central South |     |       | North |  |     | Total | 
|                               |  | (In millions)     |        
|Local                          |  | Ps.               | 1,278.1 |  |               | Ps. | 651.9 |       |  | Ps. | 34.6  | 
|Long Distance                  |  |                   | 208.4   |  |               |     | 139.0 |       |  |     | 24.1  | 
|Rent of dedicated links        |  |                   | 0.2     |  |               |     | —     |       |  |     | —     | 
|Sale of equipment to customers |  |                   | 2.5     |  |               |     | 1.6   |       |  |     | —     | 
|Capacity Leasing               |  |                   | 35.7    |  |               |     | —     |       |  |     | —     | 
|Total Revenues                 |  | Ps.               | 1,524.8 |  |               | Ps. | 792.4 |       |  | Ps. | 58.7  | 



Our Markets



Concession Areas



A majority of our
operations take place in five markets in Mexico; Mexico City, Puebla, Queretaro, San Luis Potosi and Tehuacan. We offer our full
range of products and services in each of these five areas. In addition, our concessions allow us to charge a different rate for
our services in different cities, giving us an advantage over our competitors.



Mexico City



We commenced commercial
operations in Mexico City in May 1999. Mexico City has the nation’s greatest concentration of service and manufacturing
industries, is the center of Mexico’s public and financial services sectors and has a population of approximately 20.6 million
people. Although the Federal District, which covers most of the metropolitan area, has the highest teledensity rate in Mexico
of approximately 46.1 telephone lines per 100 inhabitants as of December 31, 2012, we believe that significant unmet demand for
high-quality local telephony services in Mexico City remains. As of December 31, 2012, we had 136,062 residential lines in service
in Mexico City, representing 3% of all residential lines in service in the city according to our internal data, compared to127,566
residential lines in service as of December 31, 2011.



Puebla



We also commenced
commercial operations in the city of Puebla in May 1999. Puebla is the fourth largest city in Mexico, with a population of approximately
2.3 million people. In the city of Puebla we have expanded our market share in local telephony service from 2.5% in 2000 to 26%
of all residential lines in service in the city of Puebla as of December 31, 2012 according to our internal data. As of December
31, 2012, we had 67,046 residential lines in service, compared to 65,890 residential lines in service as of December 31, 2011.



Queretaro



We commenced commercial
operations in the city of Queretaro in November 2002. The city of Queretaro has a population of approximately 1 million people.
As of December 31, 2012, we had 14,431 residential lines in service, representing 10% of all residential lines in service in the
city of Queretaro compared to 14,296 residential lines in service as of December 31, 2011, according to our internal data.



San Luis Potosi



We also commenced
commercial operations in the city of San Luis Potosi in May 2008, with a “quadrupleplay” strategy. The city of San
Luis Potosi has a population of approximately 1.1 million people. As of December 31, 2012 we had 18,791 residential lines in service,
representing 18% of all residential lines in service in the city of San Luis Potosi, compared to 18,821 residential lines in service
as of December 31, 2011 according to our internal data.



41







Tehuacan



We commenced commercial
operations in the city of Tehuacan in February 2008 with a “triple-play” strategy. The city of Tehuacan has a population
of approximately 261 thousand people. As of December 31, 2012 we had 7,057 residential lines in service, representing 21% of all
residential lines in service to the city of Tehuacan, compared to 6,932 lines in service as of December 31, 2011 according to
our internal data.



Clusters and Single Sites



We have developed
a comprehensive marketing strategy that starts by identifying a number of under penetrated city areas with the largest potential
for new lines, which we refer to as “clusters.” We use a variety of techniques to identify potential clusters, including
canvassing, plotting of potential clusters and database marketing.



Once a cluster is
identified, a map of the geographic area is produced and the cluster is defined. The cluster becomes the basis for network design
and deployment. During the network construction phase, we also launch in tandem a targeted field sales and door-to-door marketing
effort.



Our cluster strategy
is divided into three stages:



| | · | Identify
                                                                                                               clusters through
                                                                                                               market research.
                                                                                                               Our market research
                                                                                                               is designed to
                                                                                                               identify residential
                                                                                                               customers and small-
                                                                                                               and medium-sized
                                                                                                               businesses. Once
                                                                                                               we identify potential
                                                                                                               customers within
                                                                                                               the clusters, based
                                                                                                               on the marketing
                                                                                                               sales forecast
                                                                                                               we design the deployment
                                                                                                               of the access network
                                                                                                               to cover them.
                                                                                                               We perform a return
                                                                                                               on investment and
                                                                                                               profitability analysis
                                                                                                               for each cluster
                                                                                                               to assure that
                                                                                                               the investment
                                                                                                               made in such cluster
                                                                                                               meets our return
                                                                                                               benchmarks.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Deploy
                                                                                                               clusters through
                                                                                                               the implementation
                                                                                                               of a sales plan
                                                                                                               for each cluster
                                                                                                               based on our network
                                                                                                               deployment schedule.
                                                                                                               We commence promoting
                                                                                                               our services at
                                                                                                               the same time we
                                                                                                               build our network.
                                                                                                               These coordinated
                                                                                                               and parallel efforts
                                                                                                               help reduce the
                                                                                                               time between network
                                                                                                               deployment and
                                                                                                               revenue generation.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Fill
                                                                                                               in clusters by
                                                                                                               offering our services
                                                                                                               to all customers
                                                                                                               within the cluster.
                                                                                                               Marketing efforts
                                                                                                               are focusedon achieving
                                                                                                               the highest penetration
                                                                                                               within our clusters.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Most of our clusters
are capable of supporting additional traffic, however, we may need to upgrade some of our initial clusters to be able to adequately
handle any increase in demand.



We also build our
network on a customer demand basis to support small- and medium-sized enterprises in buildings or locations other than clusters.
We refer to these locations as “single sites.” When our corporate sales personnel identify a potential opportunity,
we analyze its technical feasibility, the costs associated with providing the service within such locations and the potential
revenues, in order to determine whether it is economically attractive to offer our services in that particular location.



Our Network



Build-out Strategy



We build our network
on a modular basis. In each city where we operate, we initially install a digital switch and obtain a metropolitan fiber optic
network backbone which form the core of the network in that city. Our outside plant development is then executed in a modular
and scalable fashion based on individual network clusters that target specifically identified areas of the city that include residential
areas we deem attractive as well as areas with concentrations of small- and medium-sized businesses. Once a cluster has been identified
by our marketing, engineering and sales departments, we build our network in clusters varying from 1,500 to 6,000 lines. This
strategy allows us to match capital expenditure to customer opportunity and to concentrate our sales efforts in a timely fashion
to match the in-service dates of new clusters.



42







We have subscribers
for approximately 58% of all lines built in a new cluster within 180 days after the completion of the build-out. To ensure quality
service to our customer, we install 24-gauge copper wire and limit the distance between our backbone network and the customer
premises to three kilometers. These attributes also allow us to provide to our customers voice (including VoIP services) and data
services, such as xDSL services with bandwidth of up to 20 Mbps.



We have standardized
our network design using Alcatel-Lucent, Advanced Fiber Communications equipment and Huawei equipment (including digital subscriber
line access equipment and VoIP technology). We believe this equipment suite represents best-of-breed technologies that integrate
well to assure consistent, cost efficient, high quality service. By standardizing the equipment throughout our networks and using
a small number of suppliers who provide industry-leading vendor support and technology innovation, we increase our purchasing
effectiveness and minimize our cost of network capital expenditures.



Network Backbone



We own and operate
5,915 route-kilometers of long-haul fiber connecting 23 of Mexico’s largest cities and Laredo, Texas. We have a 24-strand
fiber optic link between the cities of Mexico City and Puebla and two strands of fiber throughout the rest of this network. The
cities this network accesses include Nuevo Laredo, Monterrey, Saltillo, San Luis Potosi, Aguascalientes, Leon, Irapuato, Guadalajara,
Celaya, Queretaro, Mexico City, Toluca,Tehuacan, Cordoba, Orizaba, Jalapa, Poza Rica, Tampico, Cd. Victoria, Matamoros, Reynosa
and Matehuala. We have installed dense wavelength division multiplexing with a maximum growth capacity of up to 32 wave lengths,
each with 2.5 and 10 Gbps capacity. We have installed three dense wavelength division multiplexing systems to date.



We own and operate
four Lucent Technologies 5ESS digital switches in the cities of Mexico City, Puebla and Queretaro with a total capacity of 282,750
trunks. Our two softswitches, the Alcatel A5020 and the Nortel CS2K provide class 4 and class 5 VoIP and Session Initiation Protocol
Trunking or SIP trunking services to the residential and commercial markets. We switch our Toluca telephone traffic using our
Mexico City switch. All of our switches are connected to the public switched telephone network through multiple dedicated fiber
connections.



We have a lit 144-strand,
59-kilometer fiber optic ring in the city of Puebla. We also have indefeasible rights of use for 299 route-kilometers of metropolitan
fiber in the Mexico City area. We have installed coarse wavelength division multiplexing equipment in our Mexico City metro fiber
network, providing a maximum growth capacity of 8 wavelengths, each with up to 2.5 Gbps capacity. We have eight Lambdas already
installed and we will install more Lambdas as needed to meet our customers’ requirements. In addition, we have the infrastructure
in place to provide local telephony service to three towns — San Martin Texmelucan, Huejotzingo and Rio Frio — located
along our Mexico City-city of Puebla fiber optic link.



We use our own fiber
optic rings to connect our microwave nodes, to provide backhaul to our switches and to connect to the public switched telephone
network. We also use this fiber to connect directly to the premises of some of our high-volume business customers for voice and
data services and private line service.



Last-mile Connectivity



The last-mile connectivity
portion of our network is comprised of a mix of wireline and wireless access technologies. We use copper feeder wire and distribution
facilities to connect the majority of our end users to our fiber network and switches. Our copper feeder wire is installed with
a mix of aerial and underground construction. Aerial is our preferred and most used method because of its lower cost and faster
speed of deployment. For aerial deployment, we typically use electricity poles we lease from the CFE. We integrate fiber optic
and Digital Subscriber Line Access Multiplexer facilities in the distribution plant to allow us to provide broadband services.



Our copper feeder
wire is designed to provide copper twisted pair loop lengths of no more than three kilometers. With these loop lengths and our
use of broadband-capable copper wire, we are capable of achieving up to 20 Mbps downstream data transmission speed to customers
on our copper network using our currently installed ADSL technology.



43







We use point-to-point
microwave transmission technology to provide rapid turn-up of service connecting newly built network clusters and single site
locations to our fiber backbone. We have point-to-point frequencies in the 15 GHz and 23 GHz bands forming a complex microwave
network throughout the cities of Mexico City, Puebla, Queretaro, San Luis Potosi, Aguascalientes, Guadalajara, Leon, Monterrey
and Toluca. We also use microwave links to connect customers directly to our own fiber network in situations where a fiber connection
is not practical and microwave provides the most cost-efficient means of providing a high speed connection. We also have a point
to-multipoint concession in the 10.5 GHz band, covering telecommunications regions 3, 5 and 8 (North, Gulf and South East) of
Mexico.



We have four Lucent
Technologies 5ESS digital switches in the cities of Mexico City, Puebla and Queretaro. Our two switches in Mexico City are equipped
for 183,390 trunks, our switch in the city of Puebla is equipped for 54,600 trunks and our switch in the city of Queretaro is
equipped for 44,760 trunks. Each trunk can generally support between one and three access lines, depending on whether it serves
a residential or a business customer. Our equipment capacity is scalable at incremental costs according to customer demand. These
switches are capable of providing analog lines, E1 digital lines, digital high-speed data services, centrex services and operator-assisted
services. In addition, they can provide private analog lines, private clear-channel digital lines, data transmission and value-added
services.



We also have two next
generation softswitches (one Alcatel-Lucent A5020and one Nortel CS2K) which provide VoIP and Session Initiation Protocol Trunking
or SIP trunking services to the residential market. Our platform is fully IP integrated with additional services including class
5 services like voice mail, call waiting and IP centrex features such as hunting group, call transfer and 3-way conference call.
Our VoIP services includes Session Initiation Protocol Trunking or SIP trunking to offer IP connectivity to IP private branch
exchange into the commercial market. The A5020 Softswitch has a capacity to manage 25,000 VoIP endpoints and is interconnected
to the public switched telecommunications network using SS7 signaling. The CS2K Nortel Softswitch located in Monterrey has the
following interconnection capacity: Class 5 functionalities for 22,000 Session Initiation Protocol trunks/lines, 488 ETSI CC S7
E1s, 63 ANSI C7 T1s, 32 R2M E1s and 32 PRI E1s.



We also own and operate
one pair of Tekelec SS7 Signaling Transfer Points in Mexico City and one in the city of Monterrey, to manage our interconnection
with all other carriers using N7 ISUP signaling.



Operational support systems



We have a network
operations and control center in Mexico City which oversees, administers and provides technical support to all of our service
areas. Our center, which uses Hewlett Packard, Sun Microsystems hardware and Lucent Technologies software controls and monitors,
among other systems, all of our network, microwave, fiber, access equipment, data equipment, synchrony, signaling and energy systems.
Our center allows us to manage a multi-vendor network with the greatest efficiency possible and to identify problems early in
order to utilize available redundancy and repair the damaged part of our network.



Our operational support
systems are designed to allow us to differentiate ourselves from our competitors by enabling us to:



| | · | offer
                                                                                                               a flexible, large
                                                                                                               selection of services;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | provide
                                                                                                               tailored service
                                                                                                               packages;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | quickly
                                                                                                               introduce products
                                                                                                               and services;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | deliver
                                                                                                               near real-time
                                                                                                               activation and
                                                                                                               disconnection;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | deliver
                                                                                                               a high quality
                                                                                                               of service;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | minimize
                                                                                                               activation errors;
                                                                                                               and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | provide
                                                                                                               accurate and timely
                                                                                                               billing services.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



44







Our information technology
strategy is to implement operational support systems possessing a high level offunctionality and flexibility from the service
order to the delivery of customer invoices. The systems include the following functional features:



| | · | Spanish
                                                                                                               language support
                                                                                                               for invoices and
                                                                                                               documentation;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | a
                                                                                                               high degree of
                                                                                                               integration among
                                                                                                               all operational
                                                                                                               support systems
                                                                                                               components;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | flow-through
                                                                                                               of information,
                                                                                                               provisioning and
                                                                                                               service activation;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | capabilities
                                                                                                               to monitor, manage
                                                                                                               and resolve network
                                                                                                               problems;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | allowance
                                                                                                               for growth on a
                                                                                                               modular scalable
                                                                                                               basis; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | support
                                                                                                               of administrative
                                                                                                               operations for
                                                                                                               financial controls.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The data center groups
all information technology infrastructures (hardware and software) to support the current and future business processes that our
organization demands. The data center contains solutions from leading companies in the IT industry, including Hewlett Packard,
Sun Microsystems, IBM, Microsoft, Oracle, Alcatel-Lucent and Cisco. We have a Hitachi mass storage solution whose architecture
offers fiber optic technology, redundancy and high availability to support storage requirements for all operational support systems.



For all IT elements,
we use a backup solution by Hewlett Packard, which lets us generate a security copy to support recovery activities. The data center
operates under a controlled condition which includes regulated energy, cooling, illumination and fire prevention systems. We collect,
format and process call records using a mediation system provided by Byte Vendor. Provisioning is managed using the ASAP System
from Oracle. The customer account and its associated products are managed in a telecommunication business system or TBS by Oracle,
which handles order management and service provisioning, workflow management, network inventory and design management and trouble
ticketing.



We use a billing system
that is highly flexible and equipped to bill all commercial products that we offer, both to residential and business customers.
It is also fully capable of bundled billing for multiple service bundles, including “double-play”, “triple-play”
and “quadruple-play” for mobile post pay subscribers. Furthermore, we developed a new billing system in 2010 and started
the migration activities of MBS (Maxcom Billing System), in order to have more flexibility for innovation in the commercial offer.
We expect to fully implement our MBS by the end of 2013. That system seeks to have the same flexibility and integration for invoicing
all our products offered for residential and business customers, adding features that will increase the effectiveness of the billing
process.



We use Settler by
Intec Company to manage reconciliation, settlement and revenue assurance of call records and intercarrier compensation with all
of the carriers with which we have interconnection agreements. We use Siebel Customer Relationship Management by Oracle for our
customer relationship management and for our contact center areas, including call center, post-sales and collections. Siebel concentrates
all historical information of customers, including contacts, products, service requests, invoicing, payments, balance due, commitments,
credit limit and network status.



Our administrative
processes system, or Enterprise Resource Planning, is Software Application Process. Some of the processes that are handled in
this system include general ledger, accounts payable, purchasing and warehouse.



Strategic Alliances



Alcatel IPTV
Supply Agreement



On December 15, 2006,
we entered into a supply and installation agreement with Alcatel Bell, N.V. and Alcatel Mexico, S.A. de C.V. (“Alcatel”)
for the supply and installation of the video over digital subscriber line systems (“IPTV systems”). Pursuant to this
agreement, Alcatel completed installation of IPTV systems using the Microsoft TV platform on June 1, 2007. This system allows
us to provide IPTV to our customers including video on demand capabilities. The total price for the supply and installation of
the IPTV system was U.S.$10.5 million.



45







MVNO Agreement with Telefonica Moviles



In 2007 we entered
into an MVNO agreement with Telefonica Moviles, pursuant to which we are able to offer mobile services to our customers by reselling
traffic and mobile numbers available from Telefonica Moviles, allowing our customers to have their landline and mobile phones
under one invoice. A MVNO provides mobile services to its customers but does not have an allocation of spectrum. Rates charged
under this agreement vary from fixed rates to variable rates based on volume utilized.



Marketing and Sales



General



We seek to develop
brand name recognition by using our corporate name, logo and product names to portray a unified image. We conduct sales efforts
within target clusters to residential customers and small- and medium-sized businesses. We seek to differentiate ourselves from
our competitors by our pricing, consistent quality and reliability of first-to-market technology, one-stop shopping, comprehensive
billing and speed of line activation.



As a result, we believe
we have positioned ourselves as an excellent quality service provider as a result of a sustained growth of our customer satisfaction
level on year by year comparisons.



Sales and Distribution
Channels



We focus our sales
efforts within clusters using door-to-door sales and telemarketing promotions. We promote our services primarily through advertisements
on radio, billboards, in-building promotions, press and magazines. As we commence the deployment of our network within a cluster,
we intensify our promotional efforts through our direct sales force in such cluster.



Our direct sales continue
in the same approach that consists of assigning sales representatives or teams to locations within a cluster or to single sites.
We had 720 sales representatives as of December 31, 2011, compared to 627 sales representatives as of December 31, 2010. As of
December 31, 2012, we had 720 sales representatives.



We assign our sales
force based on territory, product or market segment, depending on their background and experience. The compensation structure
for our sales force is tailored to attract and retain high achievers by providing a base salary and a bonus component. Sales commissions
are paid only after the new line is installed.



Candidates for our
sales force undergo extensive training that covers the industry of telecommunications, our products and our internal marketing
and sales procedures. In its sales effort, our sales force uses, among other things, multimedia presentations, corporate videos
and corporate and product brochures.



In addition to our
sales force, we have developed other distribution channels, including store fronts, agents, distributors, outsourcing and telemarketing.
In order to promote our IP services with distribution channels, we provide all the necessary support in advertising and promotion
tools to our distributors.



Customer Service



We seek to differentiate
ourselves by providing superior and consistent customer service, which is one of the main components of our business plan.



46







Our customer service
group is divided into three areas:



Centralized Call
Center.This call center, located in Mexico City, responds to calls to our customer care telephone numbers in the cities of
Mexico City, Puebla, Queretaro, San Luis Potosi and Tehuacan, Monday thru Friday from 8 am to 10 pm, Saturday & Sunday from
9 am to 9 pm. Many prospective and existing customers use our centralized call center for all types of queries, including queries
regarding billing, new services or products, area codes, rates, and line installation changes. Prior to being connected to one
of our customer service agents, we have an interactive voice response system (“IVR”) that allows customers to consult
their bill balance, payment and customer service locations, among other information. By offering customer self-service of information,
we increase satisfaction and reduce the number of calls that have to be attended by an agent. The IVR then allows the customer
to direct his call to the Centralized Call center, Centralized Trouble shooting Center or Collections.



Walk-in Center.We have two types of walk-in centers which offer customer care services and bill pay cashiers.



Customer Care Center(“CAC”).We have 14 CACs. Each one of these CACs consists of an average of 4 customer care executives and
2 cashiers. They are located as follows: four walk-in centers in Mexico City, five in the city of Puebla, one in the city of Tehuacan,
two in the city of Queretaro and two in the city of San Luis Potosi for prospective and existing customers who wish to make inquiries
in person regarding our services. Casas Maxcom(“CM”),we have 44 CMs. This is a reduced CAC concept,
as there in only one customer service executive attending the center and one salesperson. The purpose of the CM is to integrate
ourselves into the community by establishing small home-type offices, increase our brand penetration and offer additional payment
locations to our customers. They are located as follows: 17 in Mexico City, 11 in the city of Puebla, 2 in the city of Tehuacan,
7 in the city of Queretaro and 7 in the city of San Luis Potosi for prospective and existing customers who wish to make inquiries
in person regarding our services. The hours of operation of both the CACs and the CMs in Mexico City are from 9:00 am to 5:30
pm on Mondays through Fridays and from 9:30 am to 3:00 pm on Saturdays. In the rest of the cities the hours of operation are from
9:00 am to 6:00 pm on Mondays through Fridays and from 9:30 am to 3:00 pm on Saturdays.



Centralized Trouble-Shooting
Center.This call center, located in Mexico City, responds to calls in the cities of Mexico City, Puebla, Queretaro Tehuacan
and San Luis Potosi. This center is available 24 hours a day, seven days a week and handles technical problems and inquiries.



Centralized Customer
Retention Center (Telecare),this call center, located in Mexico City, receives calls transferred from any of the other call
centers or even Walk-In Centers. Its role is to enforce customer retention programs both reactively (for calls received) and proactively.
The proactive effort is based on customer life cycle and a specific customer loyalty program designed to increase customer satisfaction,
customer loyalty, and reduce churn. This center is available from Monday through Friday from 8:00 am to 8:00 pm, and Saturday
from 9 am to 2:00 pm.



Corporate Customer
Care group,we have a specialized group of customer service executives whose mission is to maintain high satisfaction levels
in selected corporate customers. The group consists of 11 persons in Mexico City and 1 person in Puebla.



Customers may access
their billing statements through our website. We have also installed an IVR that allows customers to consult their balance, payment
and customer service locations, among other information. In addition, customers may pay their bills through monthly direct deposit,
cash payments at four of the largest Mexican banks, several large chain of stores (Farmacias del Ahorro, Elektra and Tiendas Extra)
or at our walk-in centers located in Mexico City, Queretaro, Tehuacan, San Luis Potosi and the city of Puebla. We also assist
our customers with new service requests and product information.



Credit, Billing and Collection



We perform credit
checks using a leading Mexican credit bureau on all of our potential business customers. Depending on the result of the credit
check, we may request financial statements in order to analyze if a deposit, promissory note, third-party guarantee or standby
letter of credit is necessary. For business customers with an imperfect credit history we require two months deposit, which is
calculated based on the estimated average billing.



For call centers and
other high-usage customers we may require higher deposits, collect on a prepaid or weekly basis and undertake a closer monitoring
of call activity.



47







We do not perform
credit checks on residential customers who have never had service with us, which accounts for approximately 65% of our residential
customers. Instead, our sales representatives are required to verify the identity and address of such residential customers. We
do perform credit checks on customers or addresses that have had service with us and have an imperfect or poor credit history
(such customers represent about 30% of the residential customers). We plan to improve our credit underwriting process and rely
not only on credit checks but also on systems and infrastructure that will allow our sales force to make more systematic decisions.



We invoice customers
monthly on a staggered basis, except for those business customers with greater credit risk in which case we may invoice weekly,
within the four commercial billing cycles, or the three billing cycles in the case of residential customers. We process and print
our bills within seven days after closing of each cycle. Customers then have an approximate of 20 to 23 days to pay the bill (depending
on their billing cycle). We have implemented for commercial customers on our current systems a paper-less billing strategy, which
allows us to reduce billing expenses, invoice delivery times, waste and simplifies the billing information management for our
customers.



For residential and
commercial customers with one to six lines, if a bill is past-due for more than two days, we leave a reminder message on their
phone. If the bill remains unpaid for five additional days, we restrict service allowing incoming calls only. If the bill remains
unpaid for seven additional days, we suspend the service. If the bill remains unpaid for another seven days, we continue to allow
incoming calls but only for our client retention specialists to contact the customer to negotiate and collect the payment. After
an account is 30 days past-due, we continue our calling collection efforts and in the event that the customer rejects our calls,
we schedule a visit. If no payment is received after 90 days, we disconnect the line and the receivables are assigned to collection
agencies. If the bill remains unpaid, we may assign the receivables to another collection or legal agency. If a customer pays
off their debt after disconnect, we reconnect the line.



For our customers
with 12 months of billing history, we have developed more flexible terms and we restrict and suspend their service if their accounts
are unpaid 15 days later than for our newer customers. For customers with more than six lines, we use the same process described
above, except that we use a personalized approach where we try to negotiate payment terms before imposing any restriction, suspension
or disconnection of the service. We may suspend service when an invoice is at least 30 days past due. However, in the case of
high-usage customers, we may suspend service when an invoice is at least one day past due.



We use our Siebel
customer relationship management tool to manage our relationships with customers. This application works on a service request
registration basis, where our representatives register all contacts with our customers to track customer history, to solve inquires
and performs quality service, to support our business growth, collections and training of our sales force and to enhance marketing.



Competition



We primarily compete
in the local telecommunications market on the basis of customer service, value added products and price. Our main competitors
are wireline and fixed wireless local telephone operators, although we also face competition from mobile wireless operators, cable
television providers and Internet service providers.



Our core strategy
is to focus on underserved markets by targeting new customers that do not currently receive the type of products and services
we offer. In particular, our intention is to service markets with lower teledensity rates that are also underserved by Telmex.



Although we provide
long-distance service, we position such service as an integrated value-added service for our local telephony customers. As a result,
in the residential market we do not offer our long-distance service separately from our local telephony service.



In 2006, however,
we began to compete directly in the wholesale long distance market in certain cities where we have our fiber optic network.



48







Telmex



Our main local telephony
competitor is Telmex, the incumbent carrier and former government-owned telecommunications monopoly. Telmex has significantly
greater financial and other resources than those available to us. In addition, Telmex has an established customer base, which
represents approximately 72.5% of the wireline local telephone lines in service in Mexico. Telmex customers still represent the
main destination of outgoing calls from our network; therefore local interconnection with Telmex is critical to our operations.
In 2012, Telmex made a strong investment in its data services, resulting in a 72.1% market share of broadband access according
to the 8.14 million subscribers published in their financial results as of and for March 31, 2012 and according Pyramid Research’s
latest published data of total broadband accounts in 2012.



Other Competitors



We also face competition
in local telephony from companies that were awarded concessions since the opening of the Mexican wireline telecommunications market
in 1997. The more significant of these competitors are Axtel, Alestra, Mega Cable, S.A. de C.V. (“Megacable”) and
Marcatel. Axtel is a fixed wireless company that was founded in 1994. Axtel has several nationwide wireless spectrums: 60 MHz
at 10.5 GHz for point-to-multipoint access, 112 MHz at 15 GHz for point-to-point backhaul access, 100 MHz at 23 GHz for point-to-point
last-mile access and 50 MHz at 3.4 GHz for fixed wireless access, the last one being the most used for its current local service.
In the fourth quarter of 2006 Axtel acquired Avantel, S. de R.L. de C.V. (“Avantel”). This acquisition increased Axtel’s
market position in the small and medium businesses segment and also enhanced its service portfolio in the large corporate segment
with Avantel’s services portfolio. In 2007, Axtel launched its pre-WiMax service.



In 2010, Axtel developed
Fiber to the Home (“FTTH”) technology, a new capability for offering high speed broadband directly to the end user.
As part of the FTTH project, in 2010 Axtel deployed a last-mile fiber optic network in the regions with the highest home and business
broadband density in Guadalajara, Mexico City and Monterrey.



Alestra was awarded
a long-distance service concession in December 1995 and a local telephony concession in June 2000. In addition, Alestra has a
point-to-point microwave concession in the 15 GHz and 23 GHz frequency bands, a point-to-multipoint microwave concession in the
10.5 GHz frequency band and a point-to-point national wireless telecommunications concession in the 7 GHz frequency band. Alestra
offers nationwide long distance service and local service in numerous cities, including Mexico City, Puebla and Toluca. Alestra
and Axtel are using their local telephony concessions to service primarily the corporate business segment. We believe they are
targeting the small- and medium-sized business and residential segments, supported by their alliances with mass-market oriented
Internet service providers with which they have partnered to provide VoIP service through broadband access (Netvoice with Axtel
and Masternet Services with Alestra).



Dish started operations
at the end of 2008, attempting to serve lower income consumers where TV offerings were very limited at the moment. Their strategy
was based on price and a selected content offering (this content does not include Televisa). At the end of the first quarter of
2009, Dish was already offering services in several cities such as Puebla, Queretaro, Monterrey, Guadalajara, Leon, San Luis Potosi,
Cuernavaca, Tlaxcala, Toluca and in the second quarter Mexico City was launched. As a reaction, Megacable, Cablevision and Cablemas
joined forces to offer a new TV, Data and Voice package under one brand named “YOO”. As of May 12, 2009, this alliance
is focused on pricing as well as to serve the same socio economical level as Dish’s offering. YOO is currently offered in
a number of cities including the main cities in the country such as: Mexico City, Guadalajara, San Luis Potosi, Puebla, Monterrey,
Queretaro, etc. Finally, Sky an incumbent DTH pay TV company launched their own new service with a low price strategyto compete
in this same segment with Dish and the other Cable TV companies. This new brand called “VETV” has a limited channel
offering that includes Televisa content as a differentiator against Dish.



At the end of 2010,
new products aimed at small- and medium-sized enterprises appeared on the market and heavy users of data services, such as Axtel
and Iusacell that offer up to 100 MB of navigation. It is possible to provide telecommunications services through fiber optics
in areas of high and medium added value, where it is common to find offices or even corporate, the products are referred “Axtel
Xtremo” and “Iusacell Enlace”. A new competitor appears on the market during 2010, a company owned by Grupo
Salinas under the brand of "Total Play”, their services are geared to the residential market and the main advantage
is their high speed browsing due to the optical fiber last mile.



49







The Nextel/Televisa
Consortium was awarded with a concession for the 30 Mhz spectrum, however onOctober 2010, both parties announced that they mutually
agreed to terminate the agreement due to several injunctions filed against the award by Grupo Salinas, Nextel announced that they
will continue with the development of the concession.



Other competitors
such as Marcatel and Bestel that hold local telephony concessions may become more significant competitors by gaining last-mile
connectivity through alliances with cable television providers. Megacable is one of the largest cable television companies in
the country offering pay television, Internet broadband access and telephony by cable. Megacable signed a MVNO deal with Telefonica
that allows Megacable to offer quadruple play services. Cablevision, the exclusive cable provider in Mexico City, has offered
broadband Internet access since 2005, and since 2007 Cablevision has offered IP telephony with “triple play” services.



The adoption of the
Convergence Regulations by the SCT could also increase the level of competition we face in certain markets. In addition, Cofetel
issued rules relating to number portability which, when effectively applied will enable customers to switch their telephone service
to another carrier while maintaining their telephone number. Based on the results of implementation of number portability in other
countries, we believe carriers who are newer market entrants, such as us, will benefit because we expect a greater number of the
dominant carrier’s clients than newer entrant carriers’ clients to switch to another carrier.



In April 2011, Televisa
and Iusacell announced that subject to receive a regulatory approvals, Televisa will acquire 50% of the capital stock of Iusacell
through an equity investment and a conversion of debt of Iusacell. In June 2012, the CFC approved the transaction, subject to
several conditions related to television advertising and corporate governance.



Employees



As of December 31,
2012, we had 2,022 employees, a 9% decrease compared to 2,041 employees as of December 31, 2011. As of December 31 203 of our
employees are unionized and covered by the terms of a collective bargaining agreement that we entered into with the National Union
of Telecommunications, Telephony, Communications, Cybernetics, Electric, Electronic and Similar Products Workers of the Mexican
Republic (Sindicato Nacional de Trabajadores de Telecomunicaciones, Telefonia, Comunicaciones,Cibernetica, Productos Electricos,
Electronicos, Similares y Conexos de la Republica Mexicana). This agreement is renegotiated every year with respect to salaries
and every two years with respect to benefits. The current agreement expires on April 1, 2013. We have not experienced any strikes
or work stoppages and we believe we have a good relationship with our employees and the union representing them.



We also had 720 sales
representatives as of December 31, 2011, compared to 627 sales representatives as of December 31, 2010. As of December 31, 2012,
we had 720 sales representatives.



Facilities



As of December 31,
2012, our network encompasses 1,339 kilometers of metropolitan fiber optic cable and over 4,718 kilometers of high−quality
copper loops capable of high speed data transmission. We have four state−of−the−art Lucent Technologies 5ESS
switches in service, located in Mexico City (two switches), Puebla and Queretaro, and two softswitches, one Alcatel A5020 located
in Mexico City and one Nortel CSK2 located in Monterrey. We also operate a 170−kilometer fiber optic link connecting Puebla
and Mexico City and a 5,915 kilometer long haul fiber optic backbone connecting Mexico City and Laredo, Texas, allowing us to
have points of presence in the United States that allow us to sell data solutions to customers, thereby reducing their cost of
Internet services. We have a point−to−point concession in the 15 GHz and 23 GHz frequency bands forming a complex
microwave network through the cities of Mexico City, Puebla, Queretaro and San Luis Potosi, in which we currently operate. This
complex microwave network also passes through the cities of Aguascalientes, Guadalajara, Leon, Monterrey and Toluca, in which
we intend to expand our offering and footprint to allow us to obtain additional customers. We also have a point−to−multipoint
concession in the 10.5GHz frequency band, covering telecommunications regions 3, 5 and 8 (North, Gulf and South East) of Mexico.



50







We currently lease
the buildings and land where our operations are carried out and where our microwave transmission equipment and switching centers
are located. We lease space for administrative offices in Mexico City and in the cities of Puebla, Queretaro and San Luis Potosi.
Our main headquarters are located in Santa Fe, Mexico City in a building leased for a 5−year term that expires on December
31, 2017 and is renewable for one additional 5−year term. The Santa Fe lease area is comprised of 85,271 square feet.



Our offices in the
city of Puebla are leased for a 3−year renewable term that expires on March 25, 2016. These offices in Puebla are comprised
of 14,100 square feet and hold one of our Lucent Technologies 5ESS switches. We also have a branch office in Puebla that is leased
under a 5−year lease which expires on September 1, 2015. This building is comprised of 2,100 square feet. Our offices in
the City of Queretaro are leased for a 15−year renewable term that expires on August 1, 2017. These offices in Queretaro
are comprised of 12,015 square feet.



We have a branch office
in Queretaro that is leased for a 15−year term that expires on June 23, 2017. This branch office is comprised of 33,947
square feet and holds one of our other Lucent Technologies 5ESS switches. On August 1, 2008, we renewed the lease of a warehouse
in Mexico City comprised of 28,616 square feet for a 3−year term that expires on July 31, 2013. On April 1, 2007 we increased
the leased space to an additional 10,753 square feet on a 2−year lease expiring March 31, 2013, to add an on−site
vault to our warehouse. On April 1, 2008 we leased a 7,190 square feet office for a 5−year term, and on March 15, 2008 we
leased a 16,900 square feet warehouse on a 5−year term in San Luis Potosi. In addition, we lease approximately 200 other
sites that are used as walk−in centers, hosts or single−site buildings and are located throughout the cities of Mexico
City, Puebla, Queretaro, San Luis Potosi and Tehuacan Additionally, we own thirteen portions of land in the City of Puebla, San
Luis Potosi and Estado de Mexico that are used as part of our infrastructure. We believe that our facilities are adequate for
our present needs and are suitable for their intended purposes.



Legal Matters and Administrative Proceedings



We are involved in
various claims and legal actions arising in the ordinary course of business. In addition, from time to time, we become aware of
potential non−compliance with applicable regulations, which have either been identified by us (through our internal compliance
auditing program) or through notice from a governmentalentity. In some instances, these matters could potentially become the subject
of an administrative or judicial proceeding and could potentially involve monetary sanctions. We believe, after considering a
number of factors, including, but not limited to, the opinion of legal counsel, our prior experience and the nature of existing
claims andproceedings to which we are currently subject, that the ultimate disposition of these claims and proceedings should
not materially affect our consolidated financial position or results of operations.



Mexican Federal Power
Commission (Comisión Federal de Electricidad or CFE) Litigation



In July 2006, we acquired
Grupo Telereunion from the Grupo VAC Investors, a group comprised of certain members of the Vazquez family. Grupo Telereunion
was a party to a lawsuit initiated by the CFE for Ps.38.3 million in rents due for the 30−year lease of infrastructure plus
interest, entered into on June 23, 1999, that should have been paid in advance.



Although Grupo Telereunion was found ultimately
liable for Ps.42.3 million (the contested amount plus interest) following its appeal and has been ordered to pay the amount claimed
by the CFE, the entities controlled by the Grupo VAC Investors undertook to negotiate with the CFE, on behalf of Grupo Telereunion,
more favorable terms for the payment of the amount due to the CFE. On January 9, 2007, Grupo Telereunion executed an agreement
with the CFE to pay the amount due over a two−year period in semi−annual payments beginning May 29, 2007 and ending
November 29, 2008. As part of this agreement, Grupo Telereunion granted a stand−by letter of credit issued to the CFE to
secure payment of the amount due. The entities controlled by the Grupo VAC Investors have covered all of the expenses and costs
associated with the issuance of this letter of credit. The entities controlled by the Grupo VAC Investors have also lent us Ps.38.3
million which we have agreed to repay them over a 30−year period in monthly installments of no more than Ps.0.11 million
per month, bearing an interest rate of “Equilibrium Interbanking Interest Rate” (“TIIE”) plus 300 basis
points.



51







REGULATION



Industry Regulation



The telecommunications
industry in Mexico is subject to the Mexican Federal Telecommunications Law (Ley Federal de Telecomunicaciones)which was
enacted in 1995. However, certain rules set forth under the General Means of Communications Law (Ley de Vias Generales de Comunicacion),
the Telecommunications Regulation (Reglamento de Telecomunicaciones)and the rules promulgated there under generally remain
effective and are referred to as the Old Telecommunications Law.



Under the Mexican
Federal Telecommunications Law, the Mexican telecommunications industry is regulated for administrative and operational matters
by Cofetel. Cofetel was created in 1996 as an autonomous entity from the SCT to regulate and promote the efficient development
of the telecommunications industry in Mexico. Cofetel is responsible for, among other things:



| | · | enacting
                                                                                                               regulations and
                                                                                                               technical standards
                                                                                                               for the telecommunications
                                                                                                               industry;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | ensuring
                                                                                                               that holders fulfill
                                                                                                               the terms of their
                                                                                                               concessions and
                                                                                                               permits;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | suspending
                                                                                                               operators without
                                                                                                               concessions;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | resolving
                                                                                                               interconnection
                                                                                                               controversies between
                                                                                                               competitors;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | maintaining
                                                                                                               a telecommunications
                                                                                                               registry; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | maintaining
                                                                                                               a registry of applicable
                                                                                                               rates.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The SCT retains the
authority to grant all concessions and permits. Cofetel makes recommendations to the SCT on major issues, such as amending existing
telecommunications laws, allocating spectrum frequencies, granting, transferring, renewing or revoking concessions and applying
penalties for violations of provisions contained in the concession titles. The SCT has final decision-making power on these issues.
Once a final decision is made, Cofetel implements the related regulations.



The terms of our concessions
require us to satisfy a number of technical, build-out and financial conditions. A failure to comply with any of the terms of
our concessions or to obtain the waiver or modification could result in the revocation or termination of any of our concessions,
the imposition of new terms applicable to our concessions or imposition of fines. The Mexican government would not be required
to indemnify us in case of such revocation or termination. See “— Concessions and Permits — Termination”
below. A failure to comply with any of the terms of our concessions could also result in the loss of surety bonds (fianzas)that we were required to issue in favor of the SCT. We have issued surety bonds in the amount of Ps.0.52 million with respect
to our local telephony and long-distance concessions, Ps.1.81 million with respect to all seven of our point-to-point microwave
concessions and Ps.0.26 million with respect to all three of our point-to-multipoint microwave concessions.



Concessions and Permits



The SCT grants concessions
to operators of public telecommunications networks to provide specific telecommunications services in designated areas of Mexico
or nationwide. Public telecommunications network concessions granted by the SCT can cover a broad range of services, from local
and long-distance telephone services, value added services, such as Internet, to restricted television services, including cable
television services. However, once the SCT grants a concession, the concessionaire can expand the scope of its concession to cover
new services by submitting an application to, and obtaining the approval from, the SCT.



52







To provide telephony
services in Mexico through a public network, a service provider must first obtain a concession from the SCT. Pursuant to the Mexican
Federal Telecommunications Law, concessions for public telephony networks may not exceed a term of 30 years and concessions for
spectrum frequencies may not exceed a term of 20 years. Generally, concessions for public telephony networks may be extended for
a term equivalent to the term for which the concession was originally granted if the concessionaire is in compliance with the
terms of the concession and has filed an extension request in a timely manner prior to the expiration of the concession.



Concessions for spectrum
frequencies and microwave transmission concessions will be reauctioned at least three years prior to their expiration date. Concessions
specify, among other things:



| | · | the
                                                                                                               type and technical
                                                                                                               specifications
                                                                                                               of the network,
                                                                                                               system or services
                                                                                                               that may be provided;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               allocated spectrum
                                                                                                               frequencies, if
                                                                                                               applicable;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               geographical region
                                                                                                               in which the holder
                                                                                                               of the concession
                                                                                                               may provide the
                                                                                                               service;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               required capital
                                                                                                               expenditure program;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               term during which
                                                                                                               such service may
                                                                                                               be provided;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               payment, where
                                                                                                               applicable, required
                                                                                                               to be made to acquire
                                                                                                               the concession,
                                                                                                               including, where
                                                                                                               applicable, the
                                                                                                               participation of
                                                                                                               the Mexican government
                                                                                                               in the revenues
                                                                                                               of the holder of
                                                                                                               the concession
                                                                                                               or the periodic
                                                                                                               payments to be
                                                                                                               made to the Mexican
                                                                                                               government;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               amount of the surety
                                                                                                               bond (fianza);
                                                                                                               and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | rights
                                                                                                               granted to and
                                                                                                               obligations imposed
                                                                                                               on the concession
                                                                                                               holder.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition to concessions,
the SCT may also grant permits for installing, operating or exploiting transmission-ground stations and providing telecommunications
services as a reseller. There is no legally mandated maximum term for these permits unless specifically stated in the permit.
Under the Mexican Federal Telecommunications Law, a company needs to notify Cofetel of the rates for telecommunication services
it wishes to provide to be permitted to charge them to the public and, thereafter, such rates are made public information by Cofetel.



Ownership Restrictions



Under the Mexican
Federal Telecommunications Law and the Mexican Foreign Investment Law (Ley Federal de Inversion Extranjera), concessions
may be granted only to:



| | · | Mexican
                                                                                                               individuals; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------



| | · | Mexican
                                                                                                               corporations in
                                                                                                               which non-Mexicans
                                                                                                               own 49% or less
                                                                                                               of the full voting
                                                                                                               stock and that
                                                                                                               are not otherwise
                                                                                                               controlled by non-Mexicans,
                                                                                                               except in the case
                                                                                                               of concessions
                                                                                                               for cellular and
                                                                                                               personal communications
                                                                                                               services, where
                                                                                                               foreign investment
                                                                                                               participation may
                                                                                                               exceed 49% of the
                                                                                                               voting stock with
                                                                                                               prior approval
                                                                                                               of the Mexican
                                                                                                               Foreign Investment
                                                                                                               Bureau of the Mexican
                                                                                                               Ministry of Economy
                                                                                                               (Secretariade Economia).
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Pursuant to the Mexican
Foreign Investment Law, the Mexican Ministry of Economy may also authorize the issuance of non-voting or limited-voting stock
(also known as “Neutral Shares”) or ordinary participation certificates (certificados de participacion ordinaries
– CPOs), evidencing voting shares and neutralizing their vote as the underlying share is not given the right to vote,
that are not counted for purposes of determining the foreign investment percentage of a Mexican corporation’s ceiling allowed
under the Mexican Foreign Investment Law.



Foreign governments
may not own an interest in the concession holder nor own the assets used to operate the relevant concession. Any share transfers
resulting in a violation of these foreign ownership requirements are invalid under Mexican law and could result in the revocation
of the applicable public telecommunications network concession.



53







Transfer



Concessions are transferable
if the SCT approves the transfer of the concession title, the assignee agrees to comply with the terms of the concession and such
a transfer does not violate the foreign ownership requirements of the Mexican Federal Telecommunications Law and the Mexican Foreign
Investment Law.



Termination



A concession or a
permit may be terminated pursuant to the Mexican Federal Telecommunications Law upon the occurrence of any of the following events:



| | · | expiration
                                                                                                               of its term;
| | - | --------------------------------------------------------------------------------------------------------------------------------------



| | · | resignation
                                                                                                               by the concession
                                                                                                               holder or the permit
                                                                                                               holder;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | revocation;
                                                                                                               or
| | - | -----------------------------------------------------------------------------------------------------------------------------



| | · | dissolution
                                                                                                               or bankruptcy of
                                                                                                               the concession
                                                                                                               holder or the permit
                                                                                                               holder.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



A concession or a
permit may be revoked prior to the end of its term under certain circumstances, including:



| | · | failure
                                                                                                               to exercise the
                                                                                                               rights of the concession
                                                                                                               within 180 days
                                                                                                               of the grant;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | failure
                                                                                                               to provide interconnection
                                                                                                               services to other
                                                                                                               holders of telecommunications
                                                                                                               concessions and
                                                                                                               permits without
                                                                                                               reason;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

| | · | loss
                                                                                                               of the concession
                                                                                                               or permit holder’s
                                                                                                               Mexican nationality;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | unauthorized
                                                                                                               assignment, transfer
                                                                                                               or encumbrance
                                                                                                               of the concession
                                                                                                               or permit;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | unauthorized
                                                                                                               interruption of
                                                                                                               service;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | taking
                                                                                                               any action that
                                                                                                               impairs the rights
                                                                                                               of other concessionaires
                                                                                                               or permit holders;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | failure
                                                                                                               to comply with
                                                                                                               the obligations
                                                                                                               or conditions specified
                                                                                                               in the concession
                                                                                                               or permit (including
                                                                                                               making any necessary
                                                                                                               investments and
                                                                                                               capital expenditures);
                                                                                                               and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | failure
                                                                                                               to pay to the Mexican
                                                                                                               government its
                                                                                                               fee for the concession
                                                                                                               or, where applicable,
                                                                                                               its participation
                                                                                                               in the revenues
                                                                                                               of the holder of
                                                                                                               the concession.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The SCT may revoke
a concession for violations in any of the circumstances referred to in the first four events described above. Under the last four
events described above, the SCT would have to fine the concessionaire at least three times for the same failure before moving
to revoke a concession. No indemnification may be claimed or paid in the event of revocation.



Temporary Seizure



The Mexican government,
through the SCT, may also temporarily seize all assets related to a telecommunications concession or permit in the event of a
natural disaster, war, significant public disturbance, threats to internal peace or for economic reasons or for other reasons
related to national security. If the Mexican government temporarily seizes such assets, it must indemnify the concession holder
for all losses and damages, including lost revenues, except in the event of war where no payments are made. We are not aware of
any instance in which the SCT has exercised its temporary seizure powers in connection with a telecommunications company; however,
should this be the case, there is uncertainty as to when this indemnification would be paid and as to the actual amount payable.



54









Expropriation



Pursuant to applicable
law, the Mexican government has the statutory right to expropriate any telecommunications concession and claim any related assets
for reasons of public interest or national security. Under Mexican law, the Mexican government is obligated to compensate the
concession holder, considering any investments made and the depreciation of such assets, owner of such assets in the case of a
statutory expropriation.



The amount of the
compensation is determined by appraisers. If the party affected by the expropriation disagrees with the appraisal amount, such
party may initiate judicial action against the government and require a judicial authority to determine such compensation amount.
In such a case, the relevant judicial authority will determine the appropriate amount of compensation to be paid. We are not aware
of any instance in which the SCT has exercised its expropriation rights in connection with a telecommunications company.



In the event of compensation
for the temporary seizure or expropriation of a concession or a related asset, there can be no assurances that any such compensation
paid by the government will be adequate or that the affected concessionaire will receive any such compensation in a timely manner.



Rates for Telecommunications Services



Under the Mexican
Federal Telecommunications Law, rates for telecommunications services (including local, mobile and long-distance services) are
freely determined by the providers of such services, except that such rates may not be set below a service provider’s long-term
incremental cost. All rates for telecommunications services (other than value-added services) must be registered with Cofetel
prior to becoming effective.



In addition, Cofetel
is authorized to impose specific rate, quality and service requirements on those companies determined by the CFC to have substantial
market power pursuant to the provisions of Mexico’s antitrust statute. The Mexican Federal Telecommunications Law also prohibits
telecommunications providers from cross subsidizing among their services and requires that they keep separate accounting for each
of their services.



Cofetel Resolution



On June 14, 2011,
our Company received from Cofetel, the Mexican Federal Telecommunications Commission, the final outcome regarding the dispute
filed with Cofetel on December 22, 2010 about the interconnection tariffs between our Company and the mobile operators: “Calling
Party Pays” (CPP) and “Calling Party Pays National” (CPPN), based on the Articles 42, 43 and 44 of the Mexican
Telecommunications Law issued by the SCT.



Cofetel has resolved
that the CPP and CPPN tariffs to be paid by us to the main mobile telecommunication carriers is Ps.0.3912 per minute (without
any rounding), for the period, January 1, 2011 to December 31, 2011. During 2010 we paid Ps.1.0 per minute for these interconnection
tariffs. Cofetel set these tariffs based on the principle of Long Term Incremental Total Cost (CITLP). It is probable that for
the subsequent years until 2015, Cofetel will issue, on a yearly basis, resolutions oriented towards lowering the tariff established
in 2011. If Cofetel applies the same cost model used for the 2011 resolution, the most probable scenario would be an additional
10% decrease in the interconnection tariff.



Our Concessions



We currently have
public telecommunications network concessions to provide the services described below. Each of our public telecommunications network
concessions contain one or more specific exhibits that describe the telecommunications services that we are allowed to provide
under such concession. In order to broaden the scope of the services we are allowed to offer under our concessions, we must undergo
an authorization process before the SCT for each concession.



55







Local Telephony



We obtained our regional
wireline local telephony concession in December 1996. In September 2001, this concession was expanded to a nationwide concession.
The concession, which is not exclusive, grants us the right to provide business, residential and public wireline local telephony
services all over Mexico. Our wireline local telephony concession has a term of 30 years and may be renewable for up to an additional
30-year period provided we have complied with all of its terms and have received the SCT approval for the extension.



Our concession expressly
permits us to provide the following services:



| | · | basic
                                                                                                               local telephony;
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               sale or lease of
                                                                                                               network capacity
                                                                                                               for the generation,
                                                                                                               transmission or
                                                                                                               reception of signs,
                                                                                                               signals, writings,
                                                                                                               images, voice,
                                                                                                               sounds or other
                                                                                                               information of
                                                                                                               any nature;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               purchase and lease
                                                                                                               of network capacity
                                                                                                               from other carriers,
                                                                                                               including the lease
                                                                                                               of digital circuits;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | value-added
                                                                                                               services;
| | - | ------------------------------------------------------------------------------------------------------------------------------------



| | · | operator
                                                                                                               services;
| | - | ---------------------------------------------------------------------------------------------------------------------------------



| | · | data,
                                                                                                               video, audio and
                                                                                                               video conference
                                                                                                               services, except
                                                                                                               for cable or other
                                                                                                               restricted television,
                                                                                                               continuous music
                                                                                                               or digital audio;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | credit
                                                                                                               or debit telephone
                                                                                                               cards; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | public
                                                                                                               telephony.
| | - | --------------------------------------------------------------------------------------------------------------------------------



The concession does
not impose any limitations on the setting of our rates other than the requirement that we file with Cofetel a notification of
any rate change prior to it becoming effective.



The concession requires
us to comply with service quality specifications and to install infrastructure on the basis of a yearly schedule, including a
certain number of lines along routes between certain cities in Mexico. Although we complied with the requirement in our concession
for the number of lines installed, we were in default with respect to the coverage obligations in certain cities and towns required
by our concession. However, in December 2004, we obtained an amendment to both our local and long distance telephony concessions.
The amendment to the national concession to install and operate a public telecommunications network in Mexico, entered into on
December 2, 2004, sets forth a capacity installation program to attend a certain number of lines at the end of 2006. Moreover,
it sets forth a geographic expansion commitment up to 2014. We should be able to comply with the capacity installation and geographic
expansion commitment discussed above, as well as other requirements, in order for the concession to remain in effect. As of December
31, 2012 we had not been notified by the SCT of any default of any of our obligations under our concessions.



Long-distance



We obtained our nationwide
long-distance concession in December 1996, concurrently with our local telephony concession. Our nationwide long-distance concession
has a term of 30 years and may be renewable for up to an additional 30-year period, provided that we comply with all of its terms
and receive SCT approval for the extension.



Our concession expressly
permits us to provide the following services:



| | · | the
                                                                                                               carrying of switched
                                                                                                               traffic between
                                                                                                               two different local
                                                                                                               calling areas that
                                                                                                               requires the use
                                                                                                               of a dialing prefix
                                                                                                               for its routing;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



56







| | · | the
                                                                                                               sale or lease of
                                                                                                               network capacity
                                                                                                               for the generation,
                                                                                                               transmission or
                                                                                                               reception of signs,
                                                                                                               signals, writings,
                                                                                                               images, voice,
                                                                                                               sounds or other
                                                                                                               information of
                                                                                                               any nature;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                                                                                               purchase and lease
                                                                                                               of network capacity
                                                                                                               from other carriers
                                                                                                               and domestic and
                                                                                                               international long-distance
                                                                                                               telephony.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The concession expressly
prohibits the following services:



| | · | those
                                                                                                               which require a
                                                                                                               concession for
                                                                                                               frequency bands
                                                                                                               of the radio electric
                                                                                                               spectrum for specific
                                                                                                               uses;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | those
                                                                                                               which require a
                                                                                                               concession to occupy
                                                                                                               and exploit geostationary
                                                                                                               orbital positions
                                                                                                               and satellite orbits
                                                                                                               assigned to Mexico;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | those
                                                                                                               which require a
                                                                                                               concession to operate
                                                                                                               radio or television
                                                                                                               broadcasting systems;
                                                                                                               and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | cable
                                                                                                               or other restricted
                                                                                                               television.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The concession does
not impose any limitations on our ability to set rates other than the requirement that we file with Cofetel a notification of
any rate change prior to it becoming effective. The concession requires us to comply with service quality specifications and to
install infrastructure on the basis of the schedule for our local telephony concession. According to this schedule, we must provide
nationwide long-distance service in the same locations and at the same time in geographic areas where we provide local telephony
services. As described above, in December 2004, both our local and long-distance concessions were amended and we are in compliance
with the obligations of our amended concessions.



We service our long-distance
concession through direct interconnection with other carriers and by reselling our long-distance traffic to other carriers that
have such capability. We currently have long-distance interconnection with Telmex in the cities of Aguascalientes, Celaya, Guadalajara,
Irapuato, Leon, Mexico City, Monterrey, Nuevo Laredo, Puebla, Queretaro, Saltillo, San Luis Potosi and Toluca, among others.



The U.S. Federal Communications
Commission (FCC) has granted Maxcom U.S.A., Inc. and Sierra USA Communications, Inc. a license under section 214 of the Communication
Act of 1934 (“214 license”), to provide international telecommunications services between the United States and international
points, mainly Mexico.



Microwave Transmissions



Point-to-point



In October 1997, we
were awarded seven nationwide point-to-point microwave concessions. These concessions cover:



| | · | two
                                                                                                               consecutive frequency
                                                                                                               segments in the
                                                                                                               15 GHz band, with
                                                                                                               a 56 MHz bandwidth;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | three
                                                                                                               consecutive frequency
                                                                                                               segments in the
                                                                                                               23 GHz band, with
                                                                                                               a 56 MHz bandwidth;
                                                                                                               and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | two
                                                                                                               consecutive frequency
                                                                                                               segments in the
                                                                                                               23 GHz band, with
                                                                                                               a 100 MHz bandwidth.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



These concessions,
which were issued in June 1998, have a term of 20 years. Cofetel will re-auction the frequencies covered by the concessions at
least three years before the expiration date of the concessions. The concessions do not impose any limitations on the setting
of our rates other than the requirement that we file with Cofetel a notification of any rate change prior to it becoming effective.
The concessions require us to provide available capacity to the general public. We are currently in compliance with all the material
terms of the concessions.



57







Point-to-multipoint



In October 1997, we
were awarded three regional point-to-multipoint microwave concessions covering telecommunications regions 3, 5 and 8, which include
states in the north and southeast of Mexico’s Gulf region, in the 10.5 GHz frequency band with a 60MHz bandwidth. These
concessions, which were issued in April 1998, have a term of 20 years. Cofetel will re-auction the frequencies covered by the
concessions at least three years before the expiration date of the concessions. These concessions originally required us to install
a network and offer service to at least 30% of the population in each concessioned region by the end of the second year after
the issuance of the concession.



We are in compliance
with our initial coverage obligations for region 8. Although we have the capability to initiate operations in regions 3 and 5,
to date no customer has requested such service and we therefore have not initiated operations in these regions.



These concessions
do not impose any limitations on the setting of our rates other than the requirement that we file with Cofetel a notification
of any rate change prior to it becoming effective.



Cable Television



On August 4, 2006,
the SCT granted us a traditional cable concession to provide cable TV and radio services in the city of Puebla. Our cable television
concession has a term of 10 years and may be renewed for up to an additional 10-year period. Shortly thereafter, the SCT filed
the Convergence Regulations through which different types of carriers could be authorized to provide additional services to those
included in their original concessions.



On October 13, 2006,
we notified the SCT of our compliance and voluntary affiliation with the Convergence Regulations and, as a result, the SCT authorized
us to provide cable TV and radio services in addition to those services already granted in our original public telecommunication
network concession.



As a result, we are
now authorized to provide nationwide cable TV and radio services through two concessions and was the first telecommunication concessionaire
to be authorized to provide “triple-play” services. We are able to service cities by notifying the SCT and to date
have notified them of service provision in 99 cities. We intend to add more cities in the future.



Mobile Network
Operation



On January 17, 2007,
Cofetel granted us authorization to provide MVNO services based on our 1996 concession. This authorization enables us to provide
mobile service nationwide under its own brand by acquiring capacity from other mobile telephony concessionaires in Mexico. As
a result of this authorization, we were the first and only telecommunications concessionaire to offer unbundled “quadruple-play”
services exclusively under its own brand name.



The terms of both
the cable TV and radio and MVNO authorizations match our 1996 concession term of 30 years (expiring in 2026) and do not impose
any additional obligations, including minimum coverage or investment commitments, upon us.



Pre-Paid Mobile
Lines



Although we have not
provided pre-paid mobile services in the past, we are currently developing a project to launch our pre-paid mobile service during
2013.



Material Ongoing Obligations Relating to Our Concessions



Each concession title
sets forth the ongoing obligations that we must meet on a monthly, quarterly orannual basis vis-à-vis the SCT and Cofetel.
Our principal ongoing obligations include the following:



| | · | File
                                                                                                               information related
                                                                                                               to each concessionaire’s
                                                                                                               shareholders on
                                                                                                               the first quarter
                                                                                                               of every year;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



58







| | · | Prepare
                                                                                                               a monthly report
                                                                                                               on any failures
                                                                                                               and interruptions
                                                                                                               of the services;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Prepare
                                                                                                               quarterly quality
                                                                                                               of services reports
                                                                                                               which shall be
                                                                                                               filed before the
                                                                                                               SCT if required;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Prepare
                                                                                                               commercial practices
                                                                                                               guidelines which
                                                                                                               shall be available
                                                                                                               for review by any
                                                                                                               third party;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Prepare
                                                                                                               an emergency response
                                                                                                               plan which shall
                                                                                                               be filed before
                                                                                                               the SCT during
                                                                                                               the following six
                                                                                                               months after the
                                                                                                               relevant concession
                                                                                                               granting date;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Notify
                                                                                                               the SCT of any
                                                                                                               relevant event
                                                                                                               that could affect
                                                                                                               the provision of
                                                                                                               the services or
                                                                                                               the performance
                                                                                                               of the network;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Register
                                                                                                               its service fees
                                                                                                               with Cofetel each
                                                                                                               time they are modified;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | File
                                                                                                               within the following
                                                                                                               150 days after
                                                                                                               the last day of
                                                                                                               the preceding fiscal
                                                                                                               year (i) the corresponding
                                                                                                               audited financial
                                                                                                               statements, (ii)
                                                                                                               a description of
                                                                                                               the principal assets
                                                                                                               of the network,
                                                                                                               and (iii) a report
                                                                                                               on the employee
                                                                                                               training and teaching
                                                                                                               programs that are
                                                                                                               being implemented;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Prepare
                                                                                                               a quarterly report
                                                                                                               on the status of
                                                                                                               the expansion and
                                                                                                               coverage of the
                                                                                                               network;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Make
                                                                                                               available the internal
                                                                                                               statistics on traffic,
                                                                                                               routing and performance
                                                                                                               of the network;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Grant
                                                                                                               a surety bond in
                                                                                                               favor of the Federal
                                                                                                               Government (SCT)
                                                                                                               to guarantee its
                                                                                                               obligations under
                                                                                                               the concession;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | File
                                                                                                               with the SCT within
                                                                                                               the following 60
                                                                                                               days after the
                                                                                                               concession granting
                                                                                                               date a plan describing
                                                                                                               the coverage and
                                                                                                               extension of the
                                                                                                               network; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | File
                                                                                                               with the SCT the
                                                                                                               form of agreement
                                                                                                               to be entered with
                                                                                                               the concessionaire’s
                                                                                                               subscribers.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Failure to comply
with the above-mentioned obligations usually entails penalties investigated and proposed by Cofetel and imposed by the SCT. In
certain cases, failure to comply with these obligations may result in revocation of the relevant concession.



Interconnection



Local Interconnection



Our interconnection
agreement incorporates a “bill and keep” procedure under which we do not payTelmex an interconnection fee unless we
exceed a certain level of traffic imbalance. Our interconnection agreement with Telmex provides for an allowed percentage of imbalanced
traffic of 5%, subtracting from such calculation traffic from Internet Service Providers, call centers, long duration calls, trunking
operations and customers who have had contracts for less than 180 days. Under the “bill and keep” arrangement, if
the imbalance between calls originated by Telmex and terminated by us and calls originated by us and terminated by Telmex during
a month does not exceed 5%, then no interconnection fee amounts are payable by the net carrier of interconnection services. If
the imbalance exceeds 5% in any given month, the “bill and keep” feature will not apply for that month. As of December
31, 2012, the interconnection rate is Ps.0.1268 (U.S.$0.00975) per minute.



If we fail to maintain
a significant percentage of residential users, the “bill and keep” arrangement will be terminated and asymmetrical
interconnection rates may apply. Cofetel has not yet defined what constitutes a “significant percentage of residential users”
in this case, although in our local concession and in those granted to Alestra and Avantel it is defined as having at least 50%
residential customers out of our total customers.



59







Mobile Interconnection



We have also signed
reciprocal interconnection agreements with Telcel and certain affiliates of Telefonica Moviles, Nextel and Iusacell. The agreements
provide for cellular phone usage, text messaging and data usage. The total fees paid under this agreement as of December 31, 2012
were Ps.157.7 million.



Long-distance Interconnection



Long-distance carriers
are required to ensure call termination by providing transit and direct or indirect interconnection. Since we view long-distance
services as a complement to our core local telephony business, we started our operations giving our customers the option to use
our long-distance services or those of other providers.



As a result, we granted
long-distance carriers the option to pick up calls at our facilities. However, in May 2002, we obtained a waiver from Cofetel
of the obligation to offer such option to our customers. For more information about this waiver, see “—Our Concessions—Long-distance.”



We currently provide
our long-distance service only to our local telephony customers through our own network and leased facilities on a reselling basis.
In 2006, however, we began to compete directly in the wholesale long distance market in cities where we have a fiber optic network.



Local Exchange Interconnection Tariffs



In 2008, Local Exchange
Carriers (“LECs”) (comprising Alestra, Avantel/Axtel, MCM Comunicaciones, S.A. de C.V. and Bestphone, S.A. de C.V.)
filed different interconnection rates disputes against Telmex before Cofetel.



In 2009, we and Telmex
executed different amendments to our interconnection agreements, establishing that if we do not reach an agreement regarding the
interconnection rates, both parties would submit request to Cofetel for a resolution.



In 2011, Cofetel issued
several resolutions regarding the disputes between Telmex and the LECs, reducing the interconnection rates, and established the
following rates per minute:



| | · | Interconnection
                                                                                                               (origin and termination):
                                                                                                               Ps 0.03951
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Long
                                                                                                               Distance transport
                                                                                                               (resell): Ps. 0.04530
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Local
                                                                                                               Transit: Ps. 0.01904
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



We are still waiting
for Cofetel’s resolution regarding the interconnection rates dispute with Telmex for the years 2011 and 2012. We believe
that the resolution will be in the same manner as the disputes between Telmex and the other LECs. Based on the non−discrimination
conditions, we paid the interconnection rates established by Cofetel for the other carriers during 2011. Furthermore, we are requesting
the retroactive application of the interconnection rates with Telmex for the years 2009 and 2010. We believe that this resolution
will not result in any contingency, obligation or economic benefit for us as the applicable rates for such period must be resolved
by Cofetel based on the applicable law.



On April 12, 2011,
Cofetel published guidelines for developing cost models to be used to settle disputes regarding interconnection rates between
public telecommunication networks providers in the Federal Official Gazette.



In February 2012,
the Mexican Supreme Court of Justice resolved that the SCT does not have the authority to review the interconnection rates established
by Cofetel and ratified that Cofetel is the authority that should solved the interconnection tariffs disputes.



60







“By−pass” international traffic



Pursuant to regulations
of Cofetel, international long−distance traffic in Mexico must be routed and terminated through authorized international
gateways at established international settlement rates. However, less expensive alternatives which by−pass authorized gateways
exist, particularly in the case of countries with whom Mexico exchanges a significant amount of traffic. Given the disparity between
the government−authorized and alternative long−distance interconnection and termination rates through local service
routes and/or IP services, an increasing portion of the long−distance market between Mexico and the United States is served
by entities that circumvent or “by−pass” the international long−distance interconnection system. This
practice is illegal under applicable law.



We cannot confirm
whether any of our high−volume customers are engaging in “by−pass” activities. There is no requirement
to make such a determination under Mexican regulations and we have not implemented a system to detect such activity. We are required,
however, to comply with any order from competent regulatory authorities to disconnect a customer deemed to be engaged in “by−pass”
activities. In 2000, Mexican regulatory authorities announced their intention to conduct more rigorous audits of persons or companies
believed to be engaged in “by−pass” activities. In December 2000, some of the major Mexican long−distance
carriers, including us, signed a cooperation agreement to combat “by−pass” activities. If, as a consequence
of such actions, the regulatory authorities determine that any of our high−volume customers are engaged in “by−pass”
activity, we would be required to disconnect their service and our revenues could be negatively affected.



Mexican Ministry of Communications and Transportation (SCT)
Approvals



The terms of most
public telecommunications network concessions, including ours, require SCT approval in the event of a transfer of more than 10%
of a concessionaire’s outstanding capital stock, except shares representing “neutral stock,” for more information,
see “—Ownership Restrictions.” SCT approval is not required for the transfer of the shares of a holding company
that controls a company with a public telecommunications network concession. The transfer of an existing public telecommunications
network concession from one operator to another operator also requires the approval of the SCT, as well as the approval of the
CFC. See “— Antitrust Approvals.”



Maxcom entered into
a network convergence agreement with SCT on October 11, 2006, that allowed us to provide paid TV services in addition to services
included in our concession. As a result, the SCT authorized us to offer authorization paid television and audio services on October
13, 2006.



On January 17, 2007,
SCT confirmed our request in connection with MVNO service, which allows us to provide mobile cellular telephone service to our
customers, using other mobile concessionaires’ networks.



Municipal and Other Regulatory Approvals



Our transmission antennas
and telecommunication sites are located in sites that may require municipal andfederal approvals to operate. See “Risk Factors—Risks
Related to Our Business—Our telecommunications network infrastructure has several vulnerabilities and limitations.



| | C. | Organizational structure
| | -- | ------------------------



The following table
set forth our subsidiaries as of December 31, 2012:



|Name of the subsidiary                                 |  | Jurisdiction oforganization orincorporation |  | PercentageOwnership(1) | 
|------------------------------------------------------ |  | ------------------------------------------- |  | ---------------------- | 
|Maxcom Servicios Administrativos, S.A. de C.V.(2)      |  | Mexico                                      |  | 99.9                   | 
|Corporativo en Telecomunicaciones, S.A. de C.V. (2)    |  | Mexico                                      |  | 99.9                   | 
|Maxcom SF, S.A. de C.V.                                |  | Mexico                                      |  | 99.9                   | 
|Maxcom TV, S.A. de C.V. (3)                            |  | Mexico                                      |  | 99.9                   | 
|TECBTC, Estrategias de Promocion, S.A. de C.V.(2)(5)   |  | Mexico                                      |  | 99.9                   | 
|Outsourcing Operadora de Personal, S.A. de C.V. (2)(5) |  | Mexico                                      |  | 99.9                   | 
|Asesores Telcoop, S.A. de C.V.(2)(5)                   |  | Mexico                                      |  | 99.9                   | 
|Telereunión, S.A. de C.V.                              |  | Mexico                                      |  | 99.9                   | 
|Telscape de Mexico, S.A. de C.V.                       |  | Mexico                                      |  | 99.9                   | 
|Sierra Comunicaciones Globales, S.A. de C.V,           |  | Mexico                                      |  | 99.9                   | 
|Celmax Movil, S.A. de C.V. (3)                         |  | Mexico                                      |  | 99.9                   | 
|Servicios MSF, S.A. de C.V.(2)(5)                      |  | Mexico                                      |  | 99.9                   | 
|Maxcom USA, Inc.                                       |  | USA                                         |  | 100                    | 
|Sierra Communications, Inc.                            |  | USA                                         |  | 100                    | 
|Fundacion Maxcom A.C. (4)                              |  | Mexico                                      |  | 99.9                   | 



61







This organizational
structure is due to the fact that Mexican law requires that corporations have a minimum of two shareholders



| | 1. | Percentage of equity owned by us directly or indirectly
    through subsidiaries.                                                                                                                                  
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | Direct and indirect personnel subsidiaries.                                                                                                                                                                        
| | 3. | These companies are in pre-operational stage.                                                                                                                                                                      
| | 4. | A Mexican nonprofit
    foundation that will provide social services, such as education, culture and housing aids to people in need in the areas where
    we serve Fundación Maxcom is an unrestricted subsidiary.
| | 5. | Indirect subsidiaries                                                                                                                                                                                              



All of our subsidiaries are wholly-owned,
directly or indirectly, by us.



All of our subsidiaries
(except Fundación Maxcom, A.C.) act as guarantors under the indenture (as supplemented and amended) governing our senior
notes due 2014.



| | D. | Property, plant and equipment
| | -- | -----------------------------



Property



We currently lease
the buildings and land where our operations are carried out and where our microwave transmission equipment and switching centers
are located. We lease space for administrative offices in Mexico City and in the cities of Puebla, Queretaro and San Luis Potosi.
Our main headquarters are located in Santa Fe, Mexico City in a building leased for a 5−year term that expires on December
31, 2017 and is renewable for one additional 5−year term. The Santa Fe lease area is comprised of 85,271 square feet.



Our offices in the
city of Puebla are leased for a 3−year renewable term that expires on March 25, 2016. These offices in Puebla are comprised
of 14,100 square feet and hold one of our Lucent Technologies 5ESS switches. We also have a branch office in Puebla that is leased
under a 5−year lease which expires on September 1, 2015. This building is comprised of 2,100 square feet. Our offices in
the City of Queretaro are leased for a 15−year renewable term that expires on August 1, 2017. These offices in Queretaro
are comprised of 12,015 square feet.



We have a branch office
in Queretaro that is leased for a 15−year term that expires on June 23, 2017. This branch office is comprised of 33,947
square feet and holds one of our other Lucent Technologies 5ESS switches. On August 1, 2008, we renewed the lease of a warehouse
in Mexico City comprised of 28,616 square feet for a 3−year term that expires on July 31, 2013. On April 1, 2007 we increased
the leased space to an additional 10,753 square feet on a 2−year lease expiring March 31, 2013, to add an on−site
vault to our warehouse. On April 1, 2008 we leased a 7,190 square feet office for a 5−year term, and on March 15, 2008 we
leased a 16,900 square feet warehouse on a 5−year term in San Luis Potosi. In addition, we lease approximately 200 other
sites that are used as walk−in centers, hosts or single−site buildings and are located throughout the cities of Mexico
City, Puebla, Queretaro, San Luis Potosi and Tehuacan Additionally, we own thirteen portions of land in the City of Puebla, San
Luis Potosi and Estado de Mexico that are used as part of our infrastructure. We believe that our facilities are adequate for
our present needs and are suitable for their intended purposes.



62







Our Network



Build-out Strategy



We build our network
on a modular basis. In each city where we operate, we initially install a digital switch and obtain a metropolitan fiber optic
network backbone which forms the core of the network in that city.



Our outside plant
development is then executed in a modular and scalable fashion based on individual network clusters that target specifically identified
areas of the city that include residential areas we deem attractive as well as areas with concentrations of small- and medium-sized
businesses. Once a cluster has been identified by our marketing, engineering and sales departments, we build our network in clusters
varying from 1,500 to 6,000 lines. This strategy allows us to match capital expenditure to customer opportunity and to concentrate
our sales efforts in a timely fashion to match the in-service dates of new clusters.



We have subscribers
for approximately 58% of all lines built in a new cluster within 180 days after the completion of the build-out. To ensure quality
service to our customer, we install 24-gauge copper wire and limit the distance between our backbone network and the customer
premises to three kilometers. These attributes also allow us to provide to our customers voice (including VoIP services) and data
services, such as xDSL services with band width of up to 20 Mbps.



We have standardized
our network design using Alcatel-Lucent, Advanced Fiber Communications equipment and Huawei equipment (including digital subscriber
line access equipment and VoIP technology). We believe this equipment suite represents best-of-breed technologies that integrate
well to assure consistent, cost efficient, high quality service. By standardizing the equipment throughout our networks and using
a small number of suppliers who provide industry-leading vendor support and technology innovation, we increase our purchasing
effectiveness and minimize our cost of network capital expenditures.



Network Backbone



We own and operate
5,915 route-kilometers of long-haul fiber connecting 23 of Mexico’s largest cities and Laredo, Texas. We have a 24-strand
fiber optic link between the cities of Mexico City and Puebla and two strands of fiber throughout the rest of this network. The
cities this network accesses include Nuevo Laredo, Monterrey, Saltillo, San Luis Potosi, Aguascalientes, Leon, Irapuato, Guadalajara,
Celaya, Queretaro, Mexico City, Toluca, Tehuacan, Cordoba, Orizaba, Jalapa, Poza Rica, Tampico, Cd. Victoria, Matamoros, Reynosa
and Matehuala. We have installed dense wavelength division multiplexing with a maximum growth capacity of up to 32 wave lengths,
each with 2.5 and 10 Gbps capacity. We have installed three dense wavelength division multiplexing systems to date.



We own and operate
four Lucent Technologies 5ESS digital switches in the cities of Mexico City, Puebla and Queretaro with a total capacity of 282,750
trunks. Our two softswitches, the Alcatel A5020 and the NortelCS2K provide class 4 and class 5 VoIP and Session Initiation Protocol
Trunking or SIP trunking services to the residential and commercial markets. We switch our Toluca telephone traffic using our
Mexico City switch.



All of our switches
are connected to the public switched telephone network through multiple dedicated fiber connections.



We have a lit 144-strand,
59-kilometer fiber optic ring in the city of Puebla. We also have indefeasible rights of use for 299 route-kilometers of metropolitan
fiber in the Mexico City area. We have installed coarse wave length division multiplexing equipment in our Mexico City metro fiber
network, providing a maximum growth capacity of 8 wavelengths, each with up to 2.5 Gbps capacity. We have eight Lambdas already
installed and we will install more Lambdas as needed to meet our customers’ requirements. In addition, we have the infrastructure
in place to provide local telephony service to three towns — San Martin Texmelucan, Huejotzingo and Rio Frio —located
along our Mexico City-city of Puebla fiber optic link.



63







We use our own fiber
optic rings to connect our microwave nodes, to provide backhaul to our switches and to connect to the public switched telephone
network. We also use this fiber to connect directly to the premises of some of our high-volume business customers for voice and
data services and private line service.



Last-mile Connectivity



The last-mile connectivity
portion of our network is comprised of a mix of wireline and wireless access technologies. We use copper feeder wire and distribution
facilities to connect the majority of our end users to our fiber network and switches. Our copper feeder wire is installed with
a mix of aerial and underground construction. Aerial is our preferred and most used method because of its lower cost and faster
speed of deployment.



For aerial deployment,
we typically use electricity poles we lease from the CFE.



We integrate fiber
optic and Digital Subscriber Line Access Multiplexer facilities in the distribution plant to allow us to provide broadband services.



Our copper feeder
wire is designed to provide copper twisted pair loop lengths of no more than three kilometers. With these loop lengths and our
use of broadband-capable copper wire, we are capable of achieving up to 20 Mbps downstream data transmission speed to customers
on our copper network using our currently installed ADSL technology.



We use point-to-point
microwave transmission technology to provide rapid turn-up of service connecting newly built network clusters and single site
locations to our fiber backbone. We have point-to-point frequencies in the 15 GHz and 23 GHz bands forming a complex microwave
network throughout the cities of Mexico City, Puebla, Queretaro, San Luis Potosi, Aguascalientes, Guadalajara, Leon, Monterrey
and Toluca.



We also use microwave
links to connect customers directly to our own fiber network in situations where a fiber connection is not practical and microwave
provides the most cost-efficient means of providing a high speed connection.



We also have a point
to-multipoint concession in the 10.5 GHz band, covering telecommunications regions 3, 5 and 8 (North, Gulf and South East) of
Mexico. We have four Lucent Technologies 5ESS digital switches in the cities of Mexico City, Puebla and Queretaro. Our two switches
in Mexico City are equipped for 183,390 trunks, our switch in the city of Puebla is equipped for 54,600 trunks and our switch
in the city of Queretaro is equipped for 44,760 trunks.



Each trunk can generally
support between one and three access lines, depending on whether it serves a residential or a business customer.



Our equipment capacity
is scalable at incremental costs according to customer demand. These switches are capable of providing analog lines, E1 digital
lines, digital high-speed data services, Centrex services and Operator-assisted services. In addition, they can provide private
analog lines, private clear-channel digital lines, data transmission and value-added services.



We also have two next
generation softswitches (one Alcatel-Lucent A5020and one Nortel CS2K) which provide VoIP and Session Initiation Protocol Trunking
or SIP trunking services to the residential market. Our platform is fully IP integrated with additional services including class
5 services like voice mail, call waiting and IP centrex features such as hunting group, call transfer and 3-way conference call.
Our VoIP services includes Session Initiation Protocol Trunking or SIP trunking to offer IP connectivity to IP private branch
exchange into the commercial market. The A5020 Softswitch has a capacity to manage 25,000 VoIP endpoints and is interconnected
to the public switched telecommunications network using SS7 signaling. The CS2K Nortel Softswitch located in Monterrey has the
following interconnection capacity: Class 5 functionalities for 22,000 Session Initiation Protocol trunks/lines, 488 ETSI CC S7
E1s, 63 ANSI C7 T1s, 32 R2M E1s and 32 PRI E1s.



We also own and operate
one pair of Tekelec SS7 Signaling Transfer Points in Mexico City and one in the city of Monterrey, to manage our interconnection
with all other carriers using N7 ISUP signaling.



64







Operational support
systems



We have a network
operations and control center in Mexico City which oversees, administers and provides technical support to all of our service
areas. Our center, which uses Hewlett Packard, Sun Microsystems hardware and Lucent Technologies software controls and monitors,
among other systems, all of our network, microwave, fiber, access equipment, data equipment, synchrony, signaling and energy systems.
Our center allows us to manage a multi-vendor network with the greatest efficiency possible and to identify problems early in
order to utilize available redundancy and repair the damaged part of our network.



Our operational support
systems are designed to allow us to differentiate ourselves from our competitors by enabling us to:



| | · | offer
                                                                                                               a flexible, large
                                                                                                               selection of services;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | provide
                                                                                                               tailored service
                                                                                                               packages;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | quickly
                                                                                                               introduce products
                                                                                                               and services;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | deliver
                                                                                                               near real-time
                                                                                                               activation and
                                                                                                               disconnection;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | deliver
                                                                                                               a high quality
                                                                                                               of service;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | minimize
                                                                                                               activation errors;
                                                                                                               and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | provide
                                                                                                               accurate and timely
                                                                                                               billing services.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our information technology
strategy is to implement operational support systems possessing a high level of functionality and flexibility from the service
order to the delivery of customer invoices. The systems include the following functional features:



| | · | Spanish
                                                                                                               language support
                                                                                                               for invoices and
                                                                                                               documentation;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | a
                                                                                                               high degree of
                                                                                                               integration among
                                                                                                               all operational
                                                                                                               support systems
                                                                                                               components;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | flow-through
                                                                                                               of information,
                                                                                                               provisioning and
                                                                                                               service activation;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | capabilities
                                                                                                               to monitor, manage
                                                                                                               and resolve network
                                                                                                               problems;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | allowance
                                                                                                               for growth on a
                                                                                                               modular scalable
                                                                                                               basis; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | support
                                                                                                               of administrative
                                                                                                               operations for
                                                                                                               financial controls.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The data center groups
all information technology infrastructures (hardware and software) to support the current and future business processes that our
organization demands. The data center contains solutions from leading companies in the IT industry, including Hewlett Packard,
Sun Microsystems, IBM, Microsoft, Oracle, Alcatel-Lucent and Cisco. We have a Hitachi mass storage solution whose architecture
offers fiber optic technology, redundancy and high availability to support storage requirements for all operational support systems.



For all IT elements,
we use a backup solution by Hewlett Packard, which lets us generate a security copy to support recovery activities. The data center
operates under a controlled condition which includes regulated energy, cooling, illumination and fire prevention systems. We collect,
format and process call records using a mediation system provided by Byte Vendor. Provisioning is managed using the ASAP System
from Oracle. The customer account and its associated products are managed in a telecommunication business system or TBS by Oracle,
which handles order management and service provisioning, workflow management, network inventory and design management and trouble
ticketing.



65







We use a billing system
that is highly flexible and equipped to bill all commercial products that we offer, both to residential and business customers.
It is also fully capable of bundled billing for multiple service bundles, including “double-play”, “triple-play”
and “quadruple-play” for mobile postpay subscribers.



Furthermore, we developed
a new billing system in 2010 and started the migration activities of MBS (Maxcom Billing System), in order to have more flexibility
for innovation in the commercial offer. We expect to fully implement our MBS by the end of 2013.



That system seeks
to have the same flexibility and integration for invoicing all our products offered for residential and business customers, adding
features that will increase the effectiveness of the billing process.



We use Settler by
Intec Company to manage reconciliation, settlement and revenue assurance of call records and intercarrier compensation with all
of the carriers with which we have interconnection agreements. We use Siebel Customer Relationship Management by Oracle for our
customer relationship management and for our contact center areas, including call center, post-sales and collections. Siebel concentrates
all historical information of customers, including contacts, products, service requests, invoicing, payments, balance due, commitments,
credit limit and network status.



Our administrative
processes system, or Enterprise Resource Planning, is Software Application Process. Some of the processes that are handled in
this system include general ledger, accounts payable, purchasing and warehouse.



ITEM 4A. UNRESOLVED
STAFF COMMENTS



None.



ITEM 5. OPERATING
AND FINANCIAL REVIEW AND PROSPECTS



You should read
the following discussion and analysis in conjunction with the audited consolidated financial statements as of December 31, 2012,
2011 and January 1, 2011 and for the years ended December 31, 2012 and 2011 and accompanying notes appearing elsewhere in this
annual report, which are henceforth referred to as “financial statements”. The U.S. dollar translations provided in
this annual report are solely for the convenience of the reader and are, unless otherwise indicated, calculated utilizing the
buying rate at December 31, 2012, which was Ps.13.01 per U.S.$1.00 as reported by the Banco de Mexico (Central Bank of México).
Sums may not add due to rounding.



The following discussion
and analysis is intended to facilitate an understanding and assessment of significant changes and trends in our historical consolidated
results of operations and financial condition and factors affecting our financial resources. It should be read in conjunction
with the financial statements.



Adoption of New
Accounting Standards



In January 2009, the
Comisión Nacional Bancaria y de Valores (Mexican Banking and Securities Commission or “CNBV”) published certain
amendments to the Rules for Public Companies and other participants in the Mexican Securities Market that require public companies
to report financial information in accordance with the International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board (“IASB”), effective as of January 1, 2012.



Following these amendments,
on January 1, 2012, we adopted IFRS, meeting the CNBV requirements. At the same time, our financial statements for fiscal year
2011 were reconciled under IFRS to make them comparable to our financial statements for fiscal year 2012.



Our Audited Consolidated
Financial Statements included elsewhere in this Annual Report have been prepared in accordance with International Financial Reporting
Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB.



66







The Company determined
its opening balance sheet under IFRS as of January 1, 2011, following the guidance set forth by IFRS 1, First time adoption (“IFRS
1”). The options selected by the Company in the migration to IFRS and the effects on its opening balance sheet as of January
1, 2011, according to IFRS 1, as well as the effects on its balance sheets as of December 31, 2012 and 2011, and its statements
of operations and comprehensive income for the years ended December 31, 2012 and 2011, as compared to the Company’s previously
reported amounts under Mexican Financial Reporting Standards, are described in note 22 to our consolidated financial statements
included elsewhere in this annual report.



The regulations of
the Securities and Exchange Commission, or SEC, do not require foreign private issuers that prepare their financial statements
on the basis of IFRS (as published by the IASB) to reconcile such financial statements to U.S. GAAP. As such, while the Company
has in the past reconciled its consolidated financial statements prepared in accordance with MFRS to U.S. GAAP, those reconciliations
are no longer presented in the Company’s filings with the SEC.



Recent Developments



Expired Debt Exchange Offer



On December 4, 2012,
Maxcom entered into a recapitalization agreement pursuant to which it would conduct an exchange offer for its outstanding senior
secured notes and concurrently Ventura Capital Privado S.A. de C.V. would conduct a the Tender Offer for Maxcom’s outstanding
equity securities (and make a capital contribution into Maxcom. The Tender Offer and Capital Contribution were conditioned on,
among other things, the success of the Debt Exchange Offer. On February 20, 2013, Maxcom commenced the Debt Exchange Offer
to eligible holders, upon the terms and subject to the conditions set forth in the applicable offering memorandum and consent
solicitation statement, to exchange all of its outstanding senior notes due 2014 for new Step-Up senior notes due 2020. The Debt
Exchange Offer was extended three times and expired on April 24, 2013 without the conditions to the offer having been satisfied
and, as a result, Maxcom did not receive the Capital Contribution.



Without additional sources of capital, we do not expect to be able to make the coupon payment due on June
15, 2013 with respect to our senior notes due 2014 and we may not be able to meet other financial obligations as they come due.
If this occurs, holders of our senior notes due 2014 and our other creditors could commence involuntary bankruptcy proceedings
against us in Mexico or in the United States. In addition, our business is very capital intensive and there is a significant risk
that we will not have the ability to make the necessary investments in technology, infrastructure and maintenance of our network.
Because the Debt Exchange Offer and the concurrent Tender Offer have not been consummated, Maxcom has not received the Capital
Contribution. In light of this outcome, Maxcom is considering all of its alternatives including, but not limited to, commencement
of a Chapter 11 case or other restructuring proceeding. See “Risk Factors — Risks Related to Our Liquidity —
If we do not raise additional capital, we may not be able to continue as a going concern.”



New Telecommunications
Bill in Mexico



In March 2013, the
Mexican executive branch passed a bill that will result in the biggest changes in decades in the country’s telecommunications
and broadcasting sectors, seeking to give the state enough power to guarantee competition and end monopolistic practices in the
industries.



The reform, which
has also passed the Mexican Congress and is expected to be published in the near term, amends the Mexican Constitution, and creates
a new regulatory body with authority to impose regulatory measures including the authority to apply asymmetric regulation and
order the unbundling of services.



The new regulatory
body, called the Federal Telecommunications Institute, will be autonomous and have the power to grant and revoke broadcast and
telecommunications concessions.



The bill also ends
the current 49% limit on foreign investment in fixed-line telephony, and raises the foreign ownership cap for television to 49%.
It also creates a state-owned “carrier of carriers” telecom network that would allow telecom companies to access on
a competitive basis to governmental telecom infrastructure.



The Federal Telecommunications
Institute is expected to be in operation by the end of the year, with its first rulings likely to take place in 2014.



| | A. | Operating Results
| | -- | -----------------



Devaluation and Inflation



Relative to the U.S.
dollar, the peso appreciated 7.0% in 2012, depreciated 13.2% in 2011, appreciated 5.4% in 2010, appreciated 3.5% in 2009 and depreciated
24.6% in 2008. Peso depreciations contribute to increases in inflation. The following table summarizes the general economic conditions
and inflation in Mexico for the periods specified below:



67









|Year Ended December 31 |  | Inflation Rate |     |   | Average 28-day Cetes |  |     | Mexican GDP Annual Growth Rate* |  |  | Gross International Reserves as of the End of Each Year (Billion) |   
|---------------------- |  | -------------- | --- | - | -------------------- |  | --- | ------------------------------- |  |  | ----------------------------------------------------------------- | --
|                       |  |                |     |   |                      |  |     |                                 |  |  |                                                                   |   
|2012                   |  |                | 3.6 | % |                      |  | 4.2 | %                               |  |  | 3.9                                                               | % 
|2011                   |  |                | 3.8 | % |                      |  | 4.2 | %                               |  |  | 3.9                                                               | % 
|2010                   |  |                | 4.4 | % |                      |  | 4.4 | %                               |  |  | 5.4                                                               | % 
|2009                   |  |                | 3.6 | % |                      |  | 5.4 | %                               |  |  | (6.2                                                              | )%
|2008                   |  |                | 6.5 | % |                      |  | 7.7 | %                               |  |  | 1.2                                                               | % 





Source: Central Bank of Mexico



The general
economic conditions in Mexico resulting from a peso devaluation and consequential inflation may have a negative impact on our
results of operations by:



| | • | increasing the peso-carrying costs of our U.S. dollar-denominated
    debt and capital expenditure requirements;
| | - | ----------------------------------------------------------------------------------------------------------------



| | • | decreasing the purchasing power of Mexican consumers,
    resulting in a decrease in demand for telephony services; and
| | - | -----------------------------------------------------------------------------------------------------------------------



| | • | resulting in our inability, due to competitive pressures,
    to increase our prices in response to such inflation.
| | - | -------------------------------------------------------------------------------------------------------------------



Impact of Foreign Currency Fluctuations



Our principal foreign
currency fluctuation risk involves changes in the value of the peso relative to the U.S. dollar. Although U.S. dollar-denominated
revenues and expenses, including capital expenditures, are exposed to foreign currency fluctuations, our financial debt instruments
have greater exposure. As of December 31, 2012, the amount of debt denominated in U.S. dollars was Ps.2,294.7 million.



Depreciation of the
peso against the U.S. dollar results in an increase of our dollar-denominated revenues and expenses as reported in pesos. Conversely,
appreciation in the value of the peso against the U.S. dollar results in decreases to U.S. dollar-denominated revenue and expenses
as reported in pesos.



Interest expense on
our U.S. dollar-denominated debt, as expressed in pesos in our financial statements, varies with exchange rate fluctuations. Depreciation
of the peso, results in increases in interest expense on a pesos basis.



We record foreign
exchange gains or losses when the peso appreciates or depreciates against the U.S. dollar. Because our U.S. dollar-denominated
monetary liabilities have exceeded, and are expected to continue to exceed, our U.S. dollar-denominated monetary assets, depreciation
of the peso, against the U.S. dollar will result in foreign exchange losses.



The peso-to-dollar
exchange rate may experience significant devaluations in the future. Further declines in the value of the peso relative to the
U.S. dollar could adversely affect our ability to meet our U.S. dollar-denominated obligations, including our senior notes due
2014. In order to diminish the negative effects of a peso devaluation in May 2007, we entered into currency swap transactions
with the banks Morgan Stanley A.G. and Merrill Lynch Capital Markets A.G. to minimize the exchange rate risks related to the coupon
payments with respect to U.S.$150 million aggregate principal amount of the senior notes due 2014, for payments during the period
from June 2008 to December 2010. In December 2009, the company unwound the swap with Morgan Stanley A.G. and entered into a new
swap with the same bank  that covers the exchange rate risk related to the coupon payments with respect to U.S.$75 million
aggregate principal amount of the senior notes due 2014, for payments during the period from June 2010 to December 2014.



68







In March 2010 the
company unwound the swap with Merrill Lynch Capital Markets A.G. and entered into a new cross currency swap transaction with Morgan
Stanley A.G. that minimize the exchange rate risk related to the coupon payments with respect to U.S.$75 million aggregate principal
amount of the senior notes due 2014, for payments during the period from June 2010 to December 2014.



In May 2011 we amended
the cross currency swap agreements with Morgan Stanley (France), SAS to delete from the agreements the clause authorizing Morgan
Stanley to terminate the agreements in case the credit rating of Maxcom continues to decline. In counterpart, Maxcom agreed to
deposit U.S.$1.5 million in a collateral account in Morgan Stanley.



In February 2013 the
company unwound the swap with Morgan Stanley A.G. and as a result, we remain exposed to fluctuations of the peso relative to the
U.S. dollar, which could have a material adverse effect on our ability to meet our payment obligations denominated in U.S. dollars,
thereby adversely affecting our financial condition.



At December 31, 2012,
an immediate 10% devaluation of the peso relative to the U.S. dollar would have increased our interest expense (related to the
interest payments on the U.S.$50 million aggregate principal amount of our senior notes due 2014 not covered by the currency swaps)
by approximately Ps.7.2 million over a one-year period. In addition, any further decrease in the value of the peso may negatively
affect the value of Mexican securities such as ours.



See “Item 3.
Key Information — Selected Financial Data — Exchange Rates” for a discussion of exchange rates.



Revenues



Our net revenues primarily
include monthly fees, usage fees, installation charges, interconnection fees and the sales of telephone sets.



Voice services constitute our
core business. Revenues from voice services include:



| | • | installation charges of voice lines;
| | - | ------------------------------------



| | • | monthly fees for the rental of voice lines, which
    depending on the product, include a certain number of free local calls;
| | - | -----------------------------------------------------------------------------------------------------------------------------



| | • | usage charges of voice lines,
        which can include a combination of local calls above those already included in the monthly fees, long distance minutes,
        as well as minutes to mobile numbers under the “Long Distance Calling Party Pays” system; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | • | charges relating to value-added services such as voice mail,
    call waiting, call forwarding, three-way calling and caller identification;                                                                                                                       



| | • | public telephony services;
| | - | --------------------------



| | • | mobile services;
| | - | ----------------



| | • | revenues derived from our strategic and commercial
    alliances with cable television operators, which are offset by the corresponding amount we are charged by the cable television
    operator; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the sale of telephone sets.
| | - | ---------------------------



Revenues from data
services include:



| | • | Internet dial-up access;
| | - | ------------------------



| | • | asymmetric digital subscriber line;
| | - | -----------------------------------



69







| | • | dedicated Internet access;
| | - | --------------------------



| | • | managed services;
| | - | -----------------



| | • | digital private lines; and
| | - | --------------------------



| | • | lease of backbone capacity.
| | - | ---------------------------



Revenues from pay
TV includes charges related to paid TV services, such as premium channels, Pay-Per-View or Video On-Demand.



Revenues from wholesale
services are related primarily to the sale of bulk minutes where the cost of minutes depends on the volume of traffic. We also
include interconnection fees and other miscellaneous revenues in this group.



Average Revenue Per User (ARPU)



Average revenue per
user is used as an industry-standard measurement of the average amount of revenue a telecommunications company derives from each
customer of its voice business. We calculate average revenue per user by dividing the total voice revenues for a given period
by the average number of voice lines, excluding wholesale lines, in service during such period. Revenues from data and wholesale
services are reported separately and are not a factor in calculating average revenue per user.



We calculate the average
revenue per user for voice lines for each of our business and residential segments. Blended average revenue per user is affected
by our business/residential line mix because business lines tend to generate higher average revenue per user than residential
lines. Total Company average revenue per user includes public telephony revenues and lines.



Revenue Generating Units



Revenue Generating
Units or RGUs are related to the sources of revenue, which may not always be the same as subscriber numbers. One person may subscribe
to two different services thereby accounting for only one subscriber but two RGUs.



Revenue Generating
Unit is separately a telephone line, broadband internet subscriber, mobile subscriber or paid television subscriber. A home or
business may contain one or more RGUs. For example, a subscriber to our paid TV services, broadband internet, mobile telephony
service and residential telephony service would constitute four RGUs.



Operating Costs and Expenses



Our operating costs
and expenses include:



| | • | network operating costs, which include: (i) technical
    expenses (comprised of electric power, site leases and maintenance of telecommunications equipment); (ii) installation expenses,
    when applicable; and (iii) disconnection expenses;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | selling, general and administrative expenses, which
    primarily include: (i) salaries, wages and benefits; (ii) fees, which are primarily related to consulting, legal and accounting
    services; (iii) leasing costs, which are primarily related to our headquarters, warehouses and other facilities; (iv) marketing
    expenses, which are primarily related to the implementation of our branding campaign, general advertising and promotions;
    and (v) allowance for doubtful accounts (related to past due accounts receivable); and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | depreciation and amortization mainly related to
    frequency rights, telephone network systems and equipment and intangibles.
| | - | ------------------------------------------------------------------------------------------------------------------------------



70







We anticipate that
our operating costs and expenses will generally increase with the size of our network infrastructure and the number of customers
served. Our network operating costs, which are composed primarily of interconnection fees, are expected to grow at approximately
the same rate as revenues. We expect technical expenses will generally increase as the size and capacity of our network increases.
Selling, general and administrative expenses are indirectly related to the number of customers served and some of these expenses
are directly related with the acquisition of new customers. Historically, sales commissions, advertising and promotion expenses
will increase at approximately the same rate as the number of new customers acquired. Our depreciation and amortization expenses
are directly related to our existing fixed assets and to the expansion of our network and acquisition of equipment as well as
the increase of intangible assets.



Net Finance Cost



For presentation purposes,
“net finance cost” refers to the combined financial effects of:



| | • | interest expense and interest income;
| | - | -------------------------------------



| | • | effects of valuation of financial instruments;
| | - | ----------------------------------------------



| | • | net foreign exchange gains or losses; and
| | - | -----------------------------------------



| | • | derivative financial instruments gain or losses
    and the gain on repurchase of our senior notes.
| | - | ---------------------------------------------------------------------------------------------------



Critical Accounting Policies



Applications
of Critical Accounting Policies and Estimates



We have identified
certain key accounting estimates on which our consolidated financial condition and results of operations are dependent. These
key accounting estimates most often involve complex matters or are based on subjective judgments or decisions that require management
to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
We base our estimates on historical experience, where applicable and other assumptions that we believe are reasonable under the
circumstances. Actual results may differ from our estimates under different assumptions or conditions. In addition, estimates
routinely require adjustment based on changing circumstances and the receipt of new or better information. In the opinion of our
management, our most critical accounting estimates under IFRS are those that require management to make estimates and assumptions
that affect the reported amounts related to the carrying amount of telephone network systems and equipment, intangible assets,
frequency rights, including depreciation and amortization rates, assumptions made for the calculation of the impairment test to
long lived assets; valuation allowances for receivables, inventories, construction in progress of telephone network systems and
equipment and the recognition of deferred income tax assets; valuation of financial instruments; and obligations related to employee
benefits. For a full description of all of our accounting policies, see notes 5 to the consolidated financial statements included
in this document.



There are certain
critical estimates that we believe require significant judgment in the preparation of our consolidated financial statements. We
consider an accounting estimate to be critical if:



| | • | it requires us to make assumptions because information
    was not available at the time or it included matters that were highly uncertain at the time we were making the estimate; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | changes in the estimate or different estimates that
    we could have selected would have had a material impact on our financial condition or results of operations.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



71







Fair Value of Stock Options and
Warrants



Stock options and
warrants granted to members of our board of directors, officers and employees require a fair value-based accounting at the grant
date. The total amount of compensation costs recognized for an award of stock based employee compensation is based on the fair
value so determined. Fair value is defined as the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable willing parties in an arm’s-length transaction. We estimate fair values using option pricing models, which
require the use of certain assumptions, such as expected term of the option, expected volatility, risk-free interest rate during
expected term and expected dividend yield. Those assumptions are subjective and involve management judgment. The imprecision in
estimating these factors may affect the amount of compensation cost recorded for stock-based employee compensation.



Allowance of
Doubtful Accounts Receivable



The allowance for
doubtful accounts represents our estimate of losses resulting from the failure or inability of our customers to make required
payments. Determining our allowance for doubtful accounts receivable requires significant estimates. Due to the large number of
customers that we serve, it is impractical to review the creditworthiness of each of our customers, although a credit review is
performed for business customers that request more than two lines. We consider a number of factors in determining the proper size
and timing for the recognition of and the amount of the allowance, including historical collection experience, customer base,
current economic trends and the aging of the accounts receivable portfolio. From this analysis, our current policy is to reserve
in the amount of 90% and 100% of account receivable balance due over 90 but less than 119 days, and over 120 days, respectively,
except when there is a negotiated agreement with a customer. In such cases, the allowance amount is 30% with balances due over
90 days if there is not a settlement negotiated with the client.



In addition, in order
to mitigate collection risk, our collection procedures include, but are not limited to, periodic reminder phone calls once a customer
is past due, suspension of service, use of a collection agency and disconnection of service, if needed. Furthermore, within our
network we have systems to detect fraudulent call activity. If these systems fail to identify this activity, we may have to recognize
a higher degree of uncollectible accounts. While we believe that our estimates are reasonable, changes in our customer trends
or any of the factors mentioned above could materially affect our bad debt expense. At December 31, 2012, our provision for bad
debt was Ps.586.0 million. We consider this provision sufficient to cover the potential risk of uncollectible accounts; however,
we cannot assure that we will not be required to increase the amount of this provision in the future.



Revenue Recognition



Revenues from the
sale of telephone equipment to clients are recognized at the time of delivery of said equipment and the risk and rewards are transferred
to the customer. Revenues from services are recognized as rendered.



Generally installation
expenses are charged to our residential customers and related revenues are recognized when installation is complete.



Revenues from public
telephony services are recognized based on the cash collected and the estimated uncollected cash from services rendered at the
date of the financial statements.



Revenues from interconnection
services are recognized on accrued basis. We entered into local interconnection agreements with various telephone companies under
the “bill and keep” compensatory clause. In accordance with these agreements, if the imbalance between local calls
originated from the other telephone company and completed by us, and the calls originated from us and completed by the other telephone
company over the course of one month do not exceed an established percentage, there will be no payment of an interconnection rate
charge to the user for interconnection services. However, if the imbalance exceeds that percentage in a particular month, we or
the other party are subject to a charge per minute. The allowed aforementioned percentage of imbalance was 5% during the years
ended December 31, 2012 and 2011.



We also have interconnection
agreements for long-distance and mobile services with other telephony companies. However, they do not include the clause of the
“bill and keep” compensatory agreement.



Revenues from pay
television services are recognized as rendered.



Revenues from lease
of transmission capacity through the fiber optic ring are recorded in deferred revenue when billed in advance and then recognized
ratably into revenue over the term of the contract.



72







Revenue from bundled
services is recognized in the month in which the services are provided. Bundle revenues are distributed among voice, data, pay
TV or mobile services.



Valuation of Long-Lived Assets



Under IFRS IAS 36,
Impairment reviews require a comparison of the estimated future discounted cash flows to the carrying value of the asset.



If the total discounted
cash flows is less than the carrying value under IFRS, an impairment charge is recorded for the difference between the estimated
fair value and the carrying value of the asset. In making such evaluations, we estimated the fair value of the long-lived assets
as well as the discounted cash flows. In determining our discounted cash flows, we make significant assumptions and estimates
in this process regarding matters that are inherently uncertain, such as estimating remaining useful lives and the possible impact
that inflation may have on our ability to generate cash flow, as well as customer growth and the appropriate discount rate. Although
we believe that our estimates are reasonable, different assumptions regarding such remaining useful lives or future cash flows
could materially affect the valuation of our long-lived assets.



We also evaluate the
useful lives used to depreciate our long-lived assets, periodically considering their operating and use conditions.



Under IAS 38 we were
required to reassess the useful lives of our intangible assets, which primarily consist of Mexican government telecommunications
concessions and infrastructure rights. Upon reassessment, we concluded that our concessions would be definite lived intangibles.
We periodically reassess the useful lives of our concessions, in case there is evidence of impairment the value for such assets
is adjusted.



We evaluate values
of long lived assets when there are events or changes that reveal an indication of potential impairment. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an asset to future net income expected to be generated
by the asset. If the carrying amount of an asset exceeds its estimated net income, an impairment charge is recognized by the amount
that the carrying amount of the asset exceeds the fair value of the asset. Given the current adverse economic circumstances we
have faced, there have been indicators of potential impairment which have led us to test, our long-lived assets for impairments;
involving significant judgment for the determination of fair value.



During the years
ended December 31, 2012 and 2011, no impairment charges were recognized as a result of such impairment test.



Deferred
Taxes



Deferred income tax
under IFRS, are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases, and in the case of income taxes, for operating loss and asset tax carry forwards.
Deferred income tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.



Significant management
judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities recorded against our
deferred tax assets are based on management projections of future financial results. Accordingly, we have only recognized deferred
tax assets that we feel it is more likely than not that we will use our net operating loss carry forwards before they expire.



As of December 31,
2012, we had cumulative tax losses in aggregate of Ps.1,152.4 million that will be carried forward against future taxable income
as follows:



73







|Year of Loss |  | Amount                  |  | Year of Maturity |          
|------------ |  | ----------------------- |  | ---------------- | ---------
|             |  | (in thousands of pesos)
|             |  |                         |  |                  |          
|2011         |  | Ps.                     |  |                  | 194,116  
|2010         |  |                         |  |                  | 3,661    
|2008         |  |                         |  |                  | 504,415  
|2007         |  |                         |  |                  | 251,181  
|2006         |  |                         |  |                  | 84,222   
|2005         |  |                         |  |                  | 10,269   
|2004         |  |                         |  |                  | 89,056   
|2003         |  |                         |  |                  | 15,482   
|Total        |  | Ps.                     |  |                  | 1,152,402



Starting January 1,
2008, we and our subsidiaries are subject to Income Tax and IETU at a legal entity level, which means that our subsidiaries are
not consolidated for tax payment calculations.



Because management
estimates that the tax payable in future years will be Income Tax, deferred tax effects as of December 31, 2012 and 2011 have
been recorded on the Income Tax basis.



Results of Operations



The following table
sets forth, for the periods indicated, selected statement of operations data calculated in accordance with IFRS and expressed
as a percentage of net revenue:



|                                             |  | Year Ended December 31 |      
|-------------------------------------------- |  | ---------------------- | -----
|                                             |  | 2012                   |      
|Net revenues                                 |  |                        | 100  
|Operating cost and expenses:                 |  |                        |      
|Network                                      |  |                        |      
|operating costs                              |  |                        | 36.9 
|Selling, general and administrative expenses |  |                        | 31.8 
|Depreciation and amortization                |  |                        | 26.2 
|Total operating cost and expenses            |  |                        | 102.9
|Operating (loss) income                      |  |                        | (2.9 
|Other expenses:                              |  |                        |      
|Other expenses                               |  |                        | 7.8  
|Restructuring charges                        |  |                        | 0.3  
|                                             |  |                        |      
|Comprehensive cost of financing              |  |                        | (2.6 
|Income tax                                   |  |                        | 0.7  
|Net loss and comprehensive loss for the year |  |                        | (6.2 



Year Ended December 31, 2012 Compared
to Year Ended December 31, 2011



Net revenues



Our net revenues decreased
7.4%, from Ps.2,375.9 million in 2011 to Ps.2,201.3 million in 2012. The decrease primarily resulted from:



74







| | • | Residential
revenues represented 45.6% of total revenues during 2012, compared with 41.9% in the previous year of 2011. Revenues in the residential
business reached Ps.1,003.5 million in 2012, an increase of 0.9% or Ps.8.8 million in comparison to Ps.994.7 million in 2011.
The increase in revenues is a combination of a decrease in voice services by approximately Ps.89.9 million, an increase in paid
TV services by approximately Ps.34.9 million, an increase in data revenues by approximately Ps.61.7 million and an increase in
mobile services by Ps.2.7 million.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Commercial revenues represented 28.7% of total revenues
    during 2012, compared with 25.5% in 2011. Revenues in the commercial business totaled Ps.632.0 million in 2012, an increase
    of 4.1% or Ps.25.1 million in comparison to Ps.607.0 million in the year 2011. This increase in revenues was explained by
    an increase of Ps.1.6 million in voice services and an increase of Ps.23.1 million in data services.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Public Telephony represented 7.9% of total revenues
    during 2012 in comparison with 9.8% in 2011. Revenues in this segment totaled Ps.174.9 million in 2012, a decrease of 24.9%
    compared to Ps.232.8 million in 2011. The decrease in the public telephony business was primarily driven by the availability
    of the number of public telephones and a decrease in the average usage per phone.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | In 2012, wholesale revenues totaled Ps.374.1 million,
    a decrease of 29.0% in comparison to Ps.526.9 million in the same period in 2011. The decrease in the wholesale business was
    mainly driven by lower traffic.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Revenue from other services accounted for
    0.8% or Ps.16.7 million of total revenues in 2012 an increase, from the Ps.14.6 million recorded in the same period last year.
    Other revenues are primarily comprised of lease of microwave frequencies and Customer Premise Equipment (CPE) sales.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The following table
sets forth our revenues for the periods indicated below:



|                 |  | Year Ended December 31 |        
|---------------- |  | ---------------------- | -------
|                 |  | 2012                   |        
|                 |  | (In millions)          |        
|Residential      |  | Ps.                    | 1,003.5
|Commercial       |  |                        | 632.0  
|Public Telephony |  |                        | 174.9  
|Wholesale        |  |                        | 374.1  
|Other Revenue    |  |                        | 16.7   
|Total revenues   |  | Ps.                    | 2,201.3



The following table presents
a breakdown of our ARPU for the periods indicated below:



|                |  | ARPU          |      
|--------------- |  | ------------- | -----
|                |  | 2012          |      
|                |  | (In millions) |      
|                |  |               |      
|Monthly charges |  | Ps.           | 159.0
|Usage           |  |               | 107.3
|Subtotal        |  |               | 266.3
|Non-recurring   |  |               | 5.4  
|Total           |  | Ps.           | 271.7



Total ARPU (we calculate
average revenue per user by dividing the total voice revenues for a given period by the average number of voice lines, excluding
wholesale lines, in service during such period) decreased 11.5% from Ps.307.1 in 2011 to Ps.271.7 in 2012. The major changes in
absolute and relative terms were: (i) an increase in monthly charges of 26.9% from Ps.125.3 in 2011 to Ps.159.0 in 2012; (ii)
a 38.8% decrease in usage from Ps.175.2 in 2011 to Ps.107.3 in 2012; and (iii) a 17.5% decrease in non-recurring charges from
Ps.6.5 in 2011 to Ps.5.4 in 2012.



75







Revenue
Generating Units



The term RGU represents
an individual service subscriber who generates recurrent revenue for us. During 2012, we augmented a total of 54,841 revenue generating
units. As of December 31, 2012, Maxcom reported a total of 610,305 RGUs, an increase of 9.9% in comparison to the same period
last year.



The following table
presents a breakdown of our RGUs by type of customer at December 31, 2012 and 2011 and the percentage variation:



|                 |  | At December 31 |        
|---------------- |  | -------------- | -------
|                 |  | 2012           |        
|Residential      |  |                | 484,556
|Commercial       |  |                | 69,764 
|Public Telephony |  |                | 36,622 
|Wholesale lines  |  |                | 19,363 
|Total lines      |  |                | 610,305



Operating Costs
and Expenses



Our operating costs
and expenses decreased 4.3% from Ps.2,366.3 million in 2011 to Ps.2,265.4 million in 2012. This decrease was primarily the result
of:



| | • | a Ps.17.3 million, or 2.2% increase in network operating
    services resulting mainly from:
| | - | --------------------------------------------------------------------------------------------



| | o | a Ps.6.1 million lower fixed-to-mobile interconnection
    costs.
| | - | -----------------------------------------------------------------



| | o | a Ps.96.1 million lower fixed-to-mobile national
    interconnection costs.
| | - | ---------------------------------------------------------------------------



| | o | a Ps.164.3 million increase related to long distance
    interconnection costs.
| | - | -------------------------------------------------------------------------------



| | o | a Ps.37.4 million decrease related to public telephony,
    circuit and port leases and internet services.
| | - | ----------------------------------------------------------------------------------------------------------



| | o | This decrease was partially offset by a Ps.16.3
    million increase mainly due to higher data and TV content cost.
| | - | -------------------------------------------------------------------------------------------------------------------



| | • | a Ps.17.6 million, or 13.7% increase in technical expenses primarily
    due to:
| | - | --------------------------------------------------------------------------------



| | o | a Ps.5.9 million increase in network maintenance; and,
| | - | ------------------------------------------------------



| | o | a Ps.6.9 million increase in other technical expenses.
| | - | ------------------------------------------------------



| | • | Installation expenses for 2012 decrease Ps.1.2 million or 10.7%.
| | - | ----------------------------------------------------------------



| | • | a Ps.92.1 million, or 13.8% decrease in depreciation and amortization
    expenses mainly related to reduction on capital investments; and,
| | - | -------------------------------------------------------------------------------------------------------------------------------------------



| | • | Selling, general and administrative expenses decrease Ps.95.9
    million, or 12.1% primarily due to:
| | - | -----------------------------------------------------------------------------------------------------



| | o | a Ps.25.8 million decrease in salaries, wages and benefits;
| | - | -----------------------------------------------------------



| | o | a Ps.48.7 million in lower selling expenses and bad debt expenses.
| | - | ------------------------------------------------------------------



76







Net Financing
Cost



Our comprehensive
cost of financing was Ps.56.3 million in 2012, an 89.5% increase compared to Ps.537.6 million in 2011.



The following
table sets forth our comprehensive cost of financing for the periods indicated below:



|                                             |  | Year Ended December 31 |       
|-------------------------------------------- |  | ---------------------- | ------
|                                             |  | 2012                   |       
|                                             |  | (In millions)          |       
|Interest expense — Net                       |  | Ps.                    | (300.9
|Interest income — Net                        |  |                        | 5.8   
|Foreign currency gain (loss)                 |  |                        | 190.5 
|Gain on repurchase of senior notes           |  |                        | 97.8  
|Derivative financial instruments (loss) gain |  |                        | (49.5 
|Net finance cost                             |  | Ps.                    | (56.3 



The decrease of net
finance cost was primarily due to:



| | • | a Ps.3.1 million or 110.3% increase in interest income net.
    For 2012 interest income was Ps.5.8 million higher when compared to 2011;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



| | • | a
                                                                                                                               Ps.190.5
                                                                                                                               million
                                                                                                                               foreign
                                                                                                                               currency
                                                                                                                               gain
                                                                                                                               compared
                                                                                                                               to
                                                                                                                               a
                                                                                                                               net
                                                                                                                               foreign
                                                                                                                               currency
                                                                                                                               loss
                                                                                                                               of
                                                                                                                               Ps.338.0
                                                                                                                               million
                                                                                                                               recognized
                                                                                                                               in
                                                                                                                               the
                                                                                                                               same
                                                                                                                               period
                                                                                                                               last
                                                                                                                               year
                                                                                                                               mainly
                                                                                                                               due
                                                                                                                               to
                                                                                                                               an
                                                                                                                               appreciation
                                                                                                                               of
                                                                                                                               the
                                                                                                                               Mexican
                                                                                                                               peso
                                                                                                                               of
                                                                                                                               7.0%
                                                                                                                               during
                                                                                                                               2012
                                                                                                                               compared
                                                                                                                               with
                                                                                                                               a
                                                                                                                               peso
                                                                                                                               depreciation
                                                                                                                               of
                                                                                                                               13.1%
                                                                                                                               during
                                                                                                                               2011;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | a Ps. 97.8 gain on the repurchase of senior notes, which
were repurchased at fair value and had been recognized previously at a higher nominal value;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



| | • | a Ps.144.7 million effect from the valuation of derivative financial
    instruments mainly due to an appreciation of the Mexican peso as previously explained.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



Tax Provisions



We recorded a debit
of Ps.15.6 million in taxes during 2012 mainly due to a tax provision of some companies of the group, compared to the credit of
Ps.14.9 million registered in 2011.



| | B. | Liquidity and capital resources
| | -- | -------------------------------



Financing Sources
and Liquidity



Our business is capital
intensive. We have historically met our working capital and capital expenditure requirements through our various debt arrangements,
vendor financings and the sale of equity to investors. As of December 31, 2012, we had Ps.146.5 million (U.S.$11.3 million) of
cash and cash equivalents. As of December 31, 2012 we had Ps.324.6 million (U.S.$24.9 million) in working capital as defined by
us (see footnote (1) for the definition). We maintain the majority of our cash in U.S. dollar currency accounts with financial
institutions in the United States of America. These security accounts bear interest at money market levels. The remainder of our
cash is deposited with Mexican banks and invested daily in Mexican peso denominated interest bearing securities.



Our principal
uses of cash have included debt service, capital expenditures and working capital. We expect that these will remain our
principal uses of cash in the future; however, we may use cash to pursue acquisitions. We expect to use approximately
Ps.644.7 million (U.S.$50.0 million) of cash during 2013 to fund capital expenditures in connection the expansion of our
network, of which we have expended Ps.65.0 million (U.S.$5.0 million) as of February 28, 2013. As of December 31, 2012 the
estimated cost remaining to conclude the network build out construction in progress was Ps.139.6 million and management
expects to conclude them before December 31, 2013 assuming the Company has sufficient capital resources.





As of March 31, 2013,
our cash and temporary investment balance was Ps.102.9 million (U.S.$8.3 million). Our senior notes due 2014 will mature on December
15, 2014. Without additional sources of capital, we do not expect to be able to make the coupon payment due on June 15, 2013 with
respect to our senior notes due 2014 and we may not be able to meet other financial obligations as they come due or fund our planned
capital expenditures. We are considering all of our alternatives including, but not limited to, commencement of a Chapter 11 case
or other restructuring proceeding. Based on the foregoing, our ability to continue as a going concern would depends upon our ability
to otherwise raise additional capital or restructure our capital structure. See “Risk Factors — Risks Related to Our
Liquidity — If we do not raise additional capital, we may not be able to continue as a going concern.”.





77







On October 18, 2007,
we issued a total of 355,517,292 shares of Series A common stock, including the primary and secondary portions and the overallotment
option, in our initial public offering. During the initial public offering 853,592 options were exercised. Immediately following
the closing of our initial public offering, our outstanding capital stock consisted of 789,818,829 shares of Series A common stock,
1,528,827 shares of which represent the fixed portion of our capital stock and 788,290,002 shares of which represent the variable
portion of our capital stock. We received U.S.$244.0 million in net proceeds from the initial public offering. The principal purpose
of the initial public offering was to raise capital resources to fund capital expenditures related to network expansion.



On December 20, 2006,
we completed a private placement of U.S.$150 million aggregate principal amount of our senior notes due 2014. In addition, on
January 10, 2007 and September 5, 2007, we completed supplemental private placements of our senior notes due 2014, each in the
amount of U.S.$25 million. Interest on the senior notes due 2014 accrues at the rate of 11% per annum and is payable semi-annually
in arrears on June 15 and December 15, commencing on June 15, 2007. We used approximately U.S.$100.5 million of the proceeds from
these offerings to redeem our outstanding senior notes due 2007 and senior step-up notes due 2009 and to repay our 133/4% B series
bonds, our then existing credit facilities and certain vendor financings.



The indenture governing
our senior notes due 2014 contains certain covenants that, among other things, limit our ability to incur additional indebtedness
and issue preferred stock, pay dividends, make other restricted payments and investments, create liens, incur restrictions on
the ability of our subsidiaries to pay dividends or other payments by them, sell assets, merge or consolidate with other entities
and enter into transactions with affiliates. As of December 31, 2011, we are in compliance with all of the covenants contained
in the indenture governing our senior notes due 2014. The indenture governing the senior notes due 2014 prohibits us from incurring
additional indebtedness (other than permitted indebtedness) unless our leverage coverage ratio would be no greater than (i) 4.00
to 1 in the case of any incurrence or issuance on or after January 1, 2008 and on or before December 31, 2009 and (ii) 3.50 to
1 in the case of any incurrence or issuance on or after January 1, 2010, determined on a pro forma basis (including a pro forma
application of the net proceeds there from). Our leverage ratio as of a specific date is the ratio of (i) the aggregate principal
amount of our outstanding indebtedness plus the amount of all obligations in respect of the repayment of certain specified stock
and the liquidation preference of preferred stock of our restricted subsidiaries (no such stock was outstanding as of December
31, 2009) to (ii) our aggregate EBITDA for the period consisting of the last two full fiscal quarters for which financial statements
are publicly available multiplied by two. Regardless of our leverage ratio, we may incur permitted indebtedness, which includes,
among other things:



| | • | indebtedness, not to exceed U.S.$10.0 million at
    any time outstanding, represented by capital lease obligations, financings or purchase money obligations, in each case, incurred
    for the purpose of financing all or any part of the purchase price or cost of design, construction, installation or improvement
    of property, plant or equipment used in the permitted business of the company, in an aggregate principal amount, including
    all permitted refinancing indebtedness incurred to renew, refund, refinance, replace, defease or discharge any such indebtedness;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | hedging obligations for the purpose of managing
    our exposure to fluctuations in interest rates with respect to indebtedness permitted to be incurred by us pursuant to the
    indenture or protecting us against currency fluctuations in the ordinary course of business and not for speculative purposes;
    and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | indebtedness not to exceed U.S.$10.0
        million in an aggregate principal amount at any time outstanding, including all permitted refinancing indebtedness incurred
        to renew, refund, refinance, replace, defease or discharge such indebtedness.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



78







The indenture
governing our senior notes due 2014 contains events of default, including, without limitation, (subject to customary grace periods,
cure rights and materiality thresholds) defaults based on (i) the failure to make payments of interest or principal when due,
(ii) breaches of covenants, (iii) cross-defaults and cross acceleration to other material indebtedness, (iv) bankruptcy events,
(v) material judgments and (vi) the actual or asserted invalidity of any guarantee. If any such event of default occurs, the notes
could be declared due and immediately payable. Subject to certain exceptions, the indenture prohibits us and any of our restricted
subsidiaries from entering into an affiliate transaction, unless (i) the transaction is on terms no less favorable to us or the
relevant restricted subsidiary than those that would have been obtained in a comparable transaction by us or such restricted subsidiary
with an unrelated entity; (ii) in transactions involving in excess of U.S.$1.0 million, a majority of the disinterested directors
have determined that the transaction complies with (i); and (iii) in transactions involving in excess of U.S.$6.0 million, we
deliver to the trustee a fairness opinion from an investment banking firm of national standing.



Indebtedness



Our consolidated debt
as of December 31, 2012 was Ps.2,305.4 million (U.S.$177.2 million), of which Ps.2,287.9 million (U.S.$175.9 million) was long-term
debt. Ps.2,305.4 million (U.S.$177.2 million) of our consolidated debt outstanding as of December 31, 2012 was denominated in
U.S. dollars. Our leverage ratio, as defined by the indenture governing our senior notes due 2014, was 3.2:1.0 as of December
31, 2012.



During 2007, we entered
into currency swap transactions with the banks Morgan Stanley A.G. and Merrill Lynch Capital Markets A.G. to minimize the exchange
rate risks related to the coupon payments with respect to $150 million aggregate principal amount of our senior notes due 2014,
for the payments during period from June 2008 to December 2010.



In December 2009,
the company unwound the swap with Morgan Stanley A.G. and entered into a new swap with the same bank that covers the exchange
rate risk related to the coupon payments with respect to U.S.$75 million aggregate principal amount of the senior notes due 2014,
for payments during the period from June 2010 to December 2014.



In March 2010 the
company unwound the swap with Merrill Lynch Capital Markets A.G. and entered into a new cross currency swap transaction with Morgan
Stanley, A.G. that minimize the exchange rate risk related to the coupon payments with respect to U.S.$75 million aggregate principal
amount of the senior notes due 2014, for payments during the period from June 2010 to December 2014.



In May 2011 we amended
the cross currency swap agreements with Morgan Stanley (France), SAS to delete from the agreements the clause authorizing Morgan
Stanley to terminate the agreements in case the credit rating of Maxcom continues to decline. In counterpart, Maxcom agreed to
deposit U.S.$1.5 million in a collateral account in Morgan Stanley.



At December 31, 2012,
an immediate 10% devaluation of the peso relative to the U.S. dollar would have increased our interest expense (related to the
interest payments on the U.S.$50 million aggregate principal amount of our senior notes due 2014 not covered by the currency swaps)
by approximately Ps.7.2 million over a one-year period. As of February 6, 2013, we unwound all of our currency swaps and a 10%
devaluation of the peso relative to the U.S. dollar would have increased our interest expense by approximately Ps.28.7 million
over a one-year period. In addition, any further decrease in the value of the peso may negatively affect the value of Mexican
securities such as ours.



79







The following table presents
a breakdown of our consolidated debt for 2012 and 2011:



|                                                                                                                                                                                                     |  | As of December 31,  2012(1) |             |  | As of December 31, 2011(2) |      
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ----------- |  | -------------------------- | -----
|                                                                                                                                                                                                     |  | Pesos                       |             |  | Dollars                    |      
|                                                                                                                                                                                                     |  | (In thousands)              |            
|Short Term and Long Term Vendor Financing:                                                                                                                                                           |  |                             |             |  |                            |      
|Vendor financing denominated in pesos                                                                                                                                                                |  | Ps.                         | 10,661.0    |  |                            | U.S.$
|Vendor financing denominated in dollars                                                                                                                                                              |  |                             |             |  |                            |      
|Total vendor financing                                                                                                                                                                               |  |                             | 10,661.0    |  |                            |      
|Long Term Payable Notes Denominated in U.S. Dollars:                                                                                                                                                 |  |                             |             |  |                            |      
|U.S.$175 million senior secured notes (U.S.$150 million issued on December 20, 2006 and U.S.$25 million issued on January 10, 2007) bearing interest at a rate of 11%, maturing on December 15, 2014 |  |                             | 2,282,874.0 |  |                            |      
|Accrued interest                                                                                                                                                                                     |  |                             | 11,920.0    |  |                            |      
|Total long term payable bonds denominated in U.S. dollars                                                                                                                                            |  | Ps.                         | 2,305,355.0 |  |                            | U.S.$



|(1) | Nominal pesos as of December 31, 2012. Peso amounts
    were converted to U.S. dollars solely for the convenience of the reader at the rate of Ps.13.01 per U.S.$1.00 as reported
    by the Banco de México on December 31, 2012. Such conversions should not be construed as a representation that the
    peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated, or
    at any other rate.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Constant pesos as of December 31, 2011. Peso amounts were converted
    to U.S. dollars solely for the convenience of the reader at the rate of Ps.13.98 per U.S.$1.00 as reported by the Banco de
    México on December 31, 2011. Such conversions should not be construed as a representation that the peso amounts actually
    represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated, or at any other rate.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Resources from Operating, Financing
and Investing Activities



|                                                         |  | At December 31,      |         
|-------------------------------------------------------- |  | -------------------- | --------
|                                                         |  | 2012                 |         
|                                                         |  | (Thousands of pesos) |         
|Net resources provided by operating activities           |  | Ps.                  | 772,414 
|Net resources used in investing activities               |  |                      | (581,096
|Net resources (used in) provided by financing activities |  |                      | (441,382



80







Historically, our
resources generated from operating activities have not been sufficient to meet our debt service, working capital and capital expenditure
requirements. We have relied on private equity, capital markets and vendor financing. Under IFRS our earnings were insufficient
to cover our fixed charges by Ps.98.7 million (U.S.$7.6 million) in 2012, Ps.515.7 million (U.S.$39.6 million) in 2011.



As of December 31,
2012, we had Ps.146.5 million of cash and cash equivalents, compared to Ps.396.6 million in December 31, 2011.



Resources Provided
by Operating Activities



For the year ended
December 31, 2012, resources provided by operating increased by Ps.20.4 million from the same period in 2011. This increase was
mainly due to a decrease of Ps.74.1 million in cash generation as a result of a decrease of Ps.407.5 million in net loss and a
decrease of Ps.481.6 million in non−cash items included in the net loss. In addition a decrease of Ps.94.5 million in resources
was the result of changes in working capital items, mainly due to (i) a Ps.127.0 million decrease in resources from cash generation
from accounts receivable from Ps.248.5 million generated in the year ended December 31, 2011 to Ps.121.5 million generated in
the year ended December 31, 2012; (ii) a Ps.321.3 million increase in resources resulting from an increase in liabilities from
Ps.130.5 million used in the year ended December 31, 2011 to Ps.190.8million generated in the year ended December 31, 2012; and
(iii) a Ps.23.3 million decrease in resources resulting from an increase in inventory from Ps.14.8 million generated in the year
ended December 31, 2011 to the Ps.8.5 million used in the year ended December 31, 2012.



Resources Provided
by Financing Activities



For the year ended
December 31, 2012, net resources used for financing activities increased by Ps.128.1 million compared to the same period in 2011.
This increase was mainly due to (i) Ps.182.3 used to repurchase senior notes; (ii) Ps.35.2 million used to pay interest on the
notes; and (iii) Ps.1.5 million used for our stock option program in the year ended December 31, 2012.



Resources Used
for Investing Activities



For the year ended
December 31, 2012, net resources used for investing activities increased by Ps.163.7 million. This increase was mainly attributable
to an increase in investment in telephone equipment.



Capital Expenditures



Through December 31,
2012, we have invested Ps.10,727.7 million in the build out of our network operating support system and other capital expenditures,
excluding cumulative pre-operating expenses and the expenses related to the issuance of several debt instruments. This amount
includes Ps.143.9 million paid to obtain all of our frequency rights. Our 2012 capital expenditures amounted to Ps.581.1 million
(U.S.$44.7 million) and our expected capital expenditures for 2013 are approximately Ps.644.7 million (U.S.50.0 million).



Dividend Policy



Our current policy
is to reinvest profits into our operations. In addition, the indenture that governs the terms of our senior notes due 2014 allows
us to pay cash dividends only if we meet the following conditions:



| | • | a minimum consolidated leverage ratio of less than 4.00 to 1.00
    on or after January 1, 2008 and on or before December 31, 2009, and 3.50 to 1.00 on or after January 1, 2010;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                  
| | • | a minimum fixed charge coverage ratio of 2.00 to 1.00;                                                                                                                           



| | • | no default (as defined in the indenture) must have occurred
    and be continuing or result from the payment of the cash dividend; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------



81







| | • | the dividend payments together with the aggregate amount of
    all other restricted payments (as defined in the indenture) do not exceed certain amount determined in the indenture based
    on, among other things: (i) the consolidated net income of the company, (ii) the net cash flows from equity offerings, (iii)
    the lesser of the return on the restricted investments or the original amount of the restricted investment, (iv) the lesser
    of the fair market value (as defined in the indenture) of the company’s investment on a subsidiary after its redesignation
    as a restricted subsidiary or the original fair value as of the date in which such subsidiary was originally designated as
    unrestricted subsidiary.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, we may
not pay any dividend unless (i) such dividend is paid from our net profit account and the financial statements including such
net profit have been approved by a shareholder resolution and (ii) the payment of the relevant dividend is approved by a shareholder
resolution.



Recent
IFRS Accounting Pronouncements



IFRS 9 Financial Instruments (2010),
IFRS 9 Financial Instruments (2009)



IFRS 9 (2009) introduces
new requirements for the classification and measurement of financial assets. Under IFRS 9 (2009), financial assets are classified
and measured based on the business model in which they are held and the characteristics of their contractual cash flows. IFRS
9 (2010) introduces additions relating to financial liabilities. The IASB currently has an active project to make limited amendments
to the classification and measurement requirements of IFRS 9 and add new requirements to address the impairment of financial assets
and hedge accounting.



IFRS 9 (2010 and
2009) become effective for annual periods beginning on or after January 1, 2015 with early adoption permitted.



IFRS 10 Consolidated Financial Statements, IFRS 11 Joint
Arrangements, IFRS 12 Disclosure of Interests in Other Entities (2011)



IFRS 10 introduces
a single control model to determine whether an investee should be consolidated. Under IFRS 11, the structure of the joint arrangement,
although still an important consideration, is no longer the main factor in determining the type of joint arrangement and therefore
the subsequent accounting. IFRS 12 brings together into a single standard all the disclosure requirements about an entity’s
interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. IFRS 12 requires the disclosure
of information about the nature, risks and financial effects of these interests.



These standards become
effective for annual periods beginning on or after January 1, 2013 with early adoption permitted.



IFRS 13 Fair Value Measurement (2011)



IFRS 13 provides
a single source of guidance on how fair value is measured and replaces the fair value measurement guidance that is currently dispersed
throughout IFRS. Subject to limited exceptions, IFRS 13 is applied when fair value measurements or disclosures are required or
permitted by other IFRSs. IFRS 13 becomes effective for annual periods beginning on or after January 1, 2013 with early adoption
permitted.



IAS 19 Employee Benefits (2011)



IAS 19 (2011) changes
the definition of short-term and other long-term employee benefits to clarify the distinction between the two. For defined benefit
plans, the accounting policy choice for recognition of actuarial gains and losses was removed. These effects must be recognized
directly within other comprehensive income. IAS 19 (2011) becomes effective for annual periods beginning on or after January 1,
2013 with early adoption permitted.



| | C. | Research and development, patents and licenses, etc.
| | -- | ----------------------------------------------------



We do not undertake
research and development activities.



82







| | D. | Trend information
| | -- | -----------------



The Mexican Telecommunications
industry is highly influenced by various U.S. telecommunications industry trends, including:



| | • | The growth in broadband access;
| | - | -------------------------------



| | • | The convergence of services and industries, as evidenced by
    the introduction of voice, data and video bundles in the market;
| | - | --------------------------------------------------------------------------------------------------------------------------------



| | • | Industry competitors forming alliances to sell and package bundles
    under one simple price strategies;
| | - | ---------------------------------------------------------------------------------------------------------



| | • | Multi-service IP services; and
| | - | ------------------------------



| | • | Mobile services.
| | - | ----------------



The growth of competition
has been substantial and we expect it to continue. We are continuously improving our competitive position by strengthening our
voice and data products and services. The increase in competition negatively affects our profit margins.



Our current financial
constraints, including the uncertainty as to the availability of financing and the historical insufficiency of our earnings to
cover fixed charges, has and may continue to negatively affect our plans for growth, including the build out of our network.



| | E. | Off — balance sheet arrangements
| | -- | --------------------------------



We do not have any
off-balance sheet arrangements.



| | F. | Tabular disclosure of contractual obligations
| | -- | ---------------------------------------------



The following table
summarizes our minimum payments as of December 31, 2012 relating to long-term debt, operating leases, unconditional purchase obligations
and other commercial commitments for the periods indicate. Certain provisions of our obligations could result in such payments
being made in earlier periods than indicated below. For example, if a default exists under the indenture governing our senior
notes due 2014, the holders of such notes could, subject to the terms of the indenture, cause the acceleration of all principal
and accrued interest payable in respect of such notes.



|                                                    |  | Payment Due by Period   |          
|--------------------------------------------------- |  | ----------------------- | ---------
|                                                    |  | Total                   |          
|                                                    |  | (In thousands of pesos) |          
|                                                    |  |                         |          
|Contractual Obligations:                            |  |                         |          
|Long-Term Debt Obligations*                         |  | Ps.                     | 2,304,180
|Capital (Finance) Lease Obligation                  |  |                         | —        
|Vendor Financing                                    |  |                         | —        
|Capital Lease and Vendor Financing Accrued Interest |  |                         | 12,410   
|Accounts Payable to Grupo VAC**                     |  |                         | 24,991   
|Debt Obligations Interest                           |  |                         | 506,920  
|Operating Lease Obligation                          |  |                         | 324,246  
|Interest to Account Payable to Grupo VAC**          |  |                         | 19,921   
|Total                                               |  | Ps.                     | 3,192,668



83







| | * | For further information see “Item 5. Operating and Financial
    Review and Prospects — B. Liquidity and capital resources - Financing sources and liquidity”
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ** | For further information see “Item
4. Information on the Company — B. Business overview-Legal Matters and Administrative Proceedings-Mexican Federal Power
Commission (Comisión Federal de Electricidad) Litigation”
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



G. Safe Harbor



See “Special
Note Regarding Forward-Looking Statements” on page 5.



ITEM 6. DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES



A.  Directors and senior management



Our
Board of Directors



Our board of directors
is responsible for the management of our business. The board of directors is comprised of ten permanent and five alternate members,
each of whom is elected annually at our general shareholders’ meeting. All board members hold their position for one year
and may be reelected.



Our bylaws provide
that the board of directors be comprised of at least five and no more than 21 members and their corresponding alternates, in which
at least 25% of the members and their corresponding alternates are independent pursuant to Mexican law.



Meetings of the board
of directors are validly convened and held if a majority of the members are present. Resolutions passed at these meetings will
be valid if approved by a majority of the disinterested members of the board of directors present at the meeting. If required,
the chairman of the board of directors may cast a tie−breaking vote.



On April 26, 2013,
through a General Shareholders Meeting, the shareholders of Maxcom ratified the appointment of all the directors of the Company.



Mr. Jacques Gliksberg
was reelected as Chairman of the Board of Directors of the Company, Mr. Adrian Aguirre was reelected as Vice chairman of the Board
of Director.



All the members of the Audit Committee
were reelected.



All the members of the Operating Advisory
Committee were reelected.



The following table sets forth our current
directors and their alternates, as appointed by our shareholders:



|Name                                      |  | Age |  | Position                                   
|----------------------------------------- |  | --- |  | -------------------------------------------
|Jacques
    Gliksberg                     |  | 55  |  | Director
    and Chairman of the Board     
|Adrián
    Aguirre Gómez*                 |  | 62  |  | Director
    and Vice Chairman of the Board
|Eduardo
    Vázquez                       |  | 50  |  | Director                                   
|Rodrigo
    Guerra Botello *              |  | 71  |  | Director                                   
|Lorenzo
    Barrera Segovia *             |  | 54  |  | Director                                   
|Juan
    Jaime Petersen Farah *           |  | 54  |  | Director                                   
|Jorge
    Garcia Segovia *                |  | 55  |  | Director                                   
|Eduardo
    Augusto José Molina Llovera * |  | 64  |  | Director                                   
|Juan
    Miguel Gandoulf Castellanos *    |  | 53  |  | Director                                   
|Salvador
    Álvarez Valdés               |  | 47  |  | Director
    (and also our CEO)            





|* | Independent Director.
|- | ---------------------





84









|Jesus Gustavo Martinez, Efrain Ruvalcaba, Maria
    Guadalupe Aguirre Gomez, Marco Viola and Jose Antonio Solbes serve as alternate directors during the absence of Eduardo Vazquez,
    Salvador Alvarez, Adrian Aguirre Gomez, Jacques Gliksberg and Eduardo Molina Llovera, respectively. Gonzalo Alarcon I. is
    the secretary of our board of directors and our General Counsel. Christian Cassereau serves as alternate secretary of our
    board of directors. The secretary and alternate secretary do not form part of our board of directors.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Adrian Aguirre Gomez and Maria Guadalupe Aguirre Gomez are siblings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Adrian Aguirre Gomez Juan Miguel Gandoulf Castellanos, Rodrigo
    Guerra Botello, Juan Jaime Petersen Farah, Lorenzo Barrera Segovia, Jorge Garcia Segovia and Eduardo Jose Augusto Molina Llovera
    are independent directors.                                                                                                                                                                                                                                                                                                                        



Set forth below is a brief biographical
description of each of our directors:



Jacques Gliksberghas been a director
since 2002. Mr. Gliksberg served as a Series N director of Maxcom from 1998 until 2002 and in April 2011, was appointed Chairman
of our board of directors. He also sits on the board of directors of Geoplan Brasil Development Ltd. (Brazil), Organizacion Rescarven,
C.A. (Venezuela), Crown Linen, LLC, Fippex LLC. Mr. Gliksberg was a managing partner of Bank of America Equity Partners from 1994
until 2005. He is now a managing partner of Nexus Partners, LLC. Mr. Gliksberg holds a bachelor of arts degree in economics and
political science from the University of Rochester and a master’s degree in business administration from the J. L. Kellogg
Graduate School of Management at Northwestern University.



Adrian Aguirre Gomezhas been a
Chairman of our board of directors since March 1996. In December 2008 was appointed Vice President of our board of directors.
Mr. Aguirre also sits on the board of directors of Corporativo en Telecomunicaciones, S.A. de C.V., Maxcom Servicios Administrativos,
S.A. de C.V., Maxcom SF, S.A. de C.V., Maxcom TV, S.A. de C.V. (all of which are Maxcom’s subsidiaries), INCO Energia, S.A.
de C.V. Fundacion Teleton and Aurcana Corporation where he also sits in the Governance & Compensation Committee and Chairs
the Audit Committee. . He has been the chairman of the board for Operadora Plusgamma, S.A. de C.V. since 1992. Previously, Mr.
Aguirre was chief executive officer and director of Grupo Radio Centro, S.A. de C.V. from 1980 to 1999, where he began working
in 1968. Mr. Aguirre is a certified public accountant and holds an undergraduate degree in accounting from the Instituto Tecnologico
Autonomo de Mexico.



Eduardo Vazquezhas been our director
and vice president since July 2006 and in December 2008 was appointed Chairman of our board of directors until 2011. Mr. Vazquez
has served as chairman of Grupo Telereunion since July 2004. Since April 2004, Mr. Vazquez has also served as chairman of the
board of BBG Wireless, S.A. de C.V., a major supplier of infrastructure and operating facilities to some of the most important
cellular telephone companies in Mexico, such as Telefonica Moviles. In 1990, Mr. Vazquez founded Baja Celular Mexicana, and through
a joint venture with Motorola in 1994, he managed and served as chairman of four cellular companies: Baja Celular Mexicana, Movitel
del Noroeste, Celular de Telefonia Moviles and Telefonia Celular. All four companies were combined into a regional operation covering
the northern territory of Mexico, and were subsequently sold to Telefonica in 2000. Outside of the telecommunications industry,
Mr. Vazquez has founded and operated several companies in a variety of sectors, including software development, automobile dealerships
and real estate. Mr. Vazquez holds a bachelor’s degree in business administration from the United States International University
of San Diego, California.



Rodrigo Guerra Botellohas been
one of our directors since June 2002. Mr. Guerra is General Secretary of the Private Higher Education Institutions Confederation
(Federacion de Instituciones Mexicanas Particulares de Educacion Superior – FIMPES), which includes the membership
of 110 universities with half million of enrolled students. Previously, Mr. Guerra was president of the Universidad Regiomontana
in Monterrey, Mexico and executive president of CETRO (a private trust for the development of small private business in Mexico),
the national vice president of COPARMEX and the general director and treasurer of the Businessman Coordination Council. Mr. Guerra
worked for AT&T Mexico from March 1995 to January 1999 and served as president and chief executive officer of IBM de Mexico
from October 1980 to February 1995. Mr. Guerra was also director of Sidek and Situr. Mr. Guerra holds an undergraduate degree
in chemical engineering from the Instituto Tecnologico de Estudios Superiores de Monterrey.



85







Lorenzo Barrera Segovia.Mr. Barrera
has been one of our directors since December 2008. He is managing director, principal partner and member of the board of directors
for Base Internacional Casa de Bolsa, S.A. de C.V, a company that is in the business of Foreign Exchange, Money Market, Investment
Funds and serves as a Financial Adviser. Base Internacional has an authorization from the Ministry of Finance, from the Comision
Nacional Bancaria y de Valores, Banco de Mexico and is an EXIM Bank lender. Additionally, the company is rated by Standard &
Poors and Fitch Ratings and audited by Deloitte & Touche. In addition, Mr. Barrera is member of Young Presidents Organization
de Monterrey, Partner and member of the board of directors of Fraccionamiento Campestre Sierra Madre, S.A. de C.V., Casino Monterrey,
A.C., Instituto de Atencion Integral al Discapacitado Retos, ABP, American Chamber Mexico Monterrey Chapter and The Chamber of
Commerce of Canada in Monterrey. Prior to this, Mr. Barrera served as Chairman of the board of directors of Base Capital, S.A.
de C.V. and as Managing Director, Principal Partner and member of the board of directors of Base Internacional Casa de Cambio,
S.A. de C.V. Mr. Barrera was also Sub−Director of Fund Administration and Conciliation for foreign banks and held several
positions at Banpais, S.A. Mr. Barrera holds an accounting degree from the Instituto Tecnologico y de Estudios Superiores de Monterrey
and a master’s degree in finance from the same university.



Jorge Garcia Segovia.Mr. Garcia
has been one of our directors since December 2008. He is currently member of the board of directors of Cemex Mexico, S.A. de C.V.,
Compañia Minera Autlan, S.A.B. de C.V., Hoteles City Express, S.A de C.V., Ameq de Mexico, S.A. de C.V., and Koviva, S.A.
de C.V., Casino Monterrey, A.C., and of the State Council of Flora and Fauna of Nuevo Leon, A.C., and he is the current Chairman
of Club de Niños y Niñas de Nuevo Leon, A.B.P. In addition, Mr. Garcia was Investment Advisor for Vector Casa de
Bolsa, held various positions within Banca Serfin, S.A. de C.V., Director of Northern Operations for Operadora de Bolsa, S.A.
de C.V., Investment Advisor for Casa de Bolsa Interamericana, S.A. de C.V. and Project Analyst for Compañias Cuauhtemoc,
S.A. de C.V. Mr. Garcia is a Biochemical Engineer and obtained a diploma in the finance program from the Instituto Tecnologico
y de Estudios Superiores de Monterrey. Mr. Garcia is also a certified financial adviser. He is also an Honorary Consul of the
Slovakian Republic in Northeastern Mexico.



Juan Jaime Petersen Farah.Mr.
Petersen was appointed director since December 2008. He is Founding Partner of Geltung Asesores, a Mexican firm that supports
its clients in strategic planning and in the search for capital to grow existing businesses by issuing debt and private equity.
In addition, Mr. Petersen is member of the board of directors of Convertidora Industrial, S.A. de C.V., Consorcio Terrenos, S.A.
de C.V., and Chairman of the board of directors for Minsa, S.A. de C.V. and Almer, S.A. de C.V. Prior to this, Mr. Petersen was
also member of the board of directors of Motor Coach Industries, Inc., Pacific Star, Inc. in which he also served as adviser in
the sale of that business and for Tequila Herradura, S.A. de C.V. in which he worked on the Tequila Herradura’s share buyback
to Grupo Osborne and the sale of assets among other activities. In addition, Mr. Petersen was Managing Director of Blockbuster
Video Mexico, S.A. de C.V., Advisor for American Breco, Inc. and Director of Finance for Grupo Sidek, S.A. de C.V. Mr. Petersen
has a degree in economics from the University of Guadalajara.



Eduardo Augusto Jose Molina Llovera.Mr. Molina is a founding partner and Chief Executive Officer (“CEO”) of CASUS MEDIA, an outdoor advertising company
that supplies media buyers with very specific products and services in Mexico. He was a founding partner and CEO of Difusion Panoramica,
S.A. de C.V., an outdoor advertising company operating nationwide in Mexico, from 2001 to 2012. Since 2004 and until February
2011, he was President of the Asociacion Mexicana de Publicidad Exterior, A.C. and member of the Consejo de Publicidad Exterior
in Mexico City and of the Consejo de la Comunicacion. From October 1997 to August 2001, he was CEO of Vendor, S.A. de C.V. Previously,
since 1977, he held various positions in Grupo Televisa, S.A. de C.V. including Head of the Telemarketing and Promotions business
and Head of Information Technologies and Data Communications. Mr. Molina holds an industrial engineering degree from the Universidad
Iberoamericana and a master ́s degree in Business Administration from the Instituto Tecnologico y de Estudios Superiores
de Monterrey and a Diploma in Bussiness from the IPADE.



Salvador Alvarez Valdes. Mr. Alvarez
has been our Chief Executive Officer since February 2011, Prior to joining us, Mr. Alvarez served as Chief Executive Officer (CEO)
of Medicus. He served as Managing Director of Red Legal; earlier in his career, Mr. Alvarez also served as General Manager of
Corporativo Corvi, President and General Manager of ConAgra Foods, President and General Manager of Productos del Monte−ConAgra
Grocery Products, SVP and GM of ConAgra Refrigerated Prepared Foods, VP and GM of ConAgra Refrigerated Prepared Foods, VP of International
Operations of ConAgra, CEO of Campofrio Mexico. Mr. Alvarez holds a Post Graduate Degree by Instituto Panamericano de Alta Direccion
de Empresa (IPADE), a Bachelor in Economics for the Universidad Complutense de Madrid and CEU San Pablo both located in Spain.



86







Juan Miguel Gandoulf Castellanos.Mr.
Gandoulf was appointed as director and member of our Audit and Corporate Practices Committee in April 2011. In April 2012, he
was appointed as Chairman of the Audit Committee. Mr. Gandoulf also serves as director and member of the Audit Committee of El
Puerto de Liverpool, S.A.B. de C.V. since 2002. Previously, since 2005, he has been CEO of Sagnes Constructores, S.A. de C.V.
and since 2003 Mr. Gandoulf has been Treasurer of Colegio Franco Mexicano, A.C. From January 1994 to October 2003, Mr Gandoulf
served as Administrative Manager of Eurotecno, S.A. de C.V. He also served in several positions in Fabricas de Francia, S.A. de
C.V. Mr. Gandoulf holds an accounting degree from the Universidad Autonoma de Guadalajara and a master’s degree in Business
Administration from the United States International University at San Diego, California.



Senior Management



Our executive officers
are appointed by the board of directors for an indefinite term and may be removed by the board of directors at will, provided
the corresponding severance payments are made in accordance with Mexican labor law and the applicable labor contract.



Set forth below are
the name, age, position and a description of the business experience of each of our executive officers not described above. The
business address of our executive officers is that of our principal office.



|Name                    |  | Age |  | Position                       
|----------------------- |  | --- |  | -------------------------------
|Salvador Álvarez Valdés |  | 47  |  | Chief Executive Officer        
|Gabriel Cejudo Funes    |  | 47  |  | Chief Residential Sales Officer



Set forth below is a brief biographical
description of each of our executive officers:



Salvador Alvarez Valdes. See “Management––Our
Board of Directors.”



Gabriel Cejudo Funeshas been our
Sales, Marketing and Client Service Vice President since April 2011. Mr. Cejudo has over 18 years of experience in the telecommunications
industry. Prior to joining us in 2006, Mr. Cejudo was Data Vice President and previously worked at Iusacell for 8 years. Mr. Cejudo
holds a chemistry engineering degree from the Universidad Iberoamericana in Mexico City and a masters in business administration
from the Instituto Panamericano de Alta Direccion de Empresa (IPADE).



B. Compensation



The only agreements
that we currently maintain for purposes of compensating our employees with our capital stock are our executive stock option plans
described below.



We paid an aggregate
of Ps.1.1 million in cash compensation to the members of our board of directors during 2012.



Our senior management
is not entitled to any benefits upon termination, except for what is due to them according to the Federal Labor Law (Ley Federal
del Trabajo), except in the case of a change in control, where a third party takes control of the company and terminates the labor
agreement of some members of our senior management. In this case those members will be entitled to receive a termination bonus.



Executives Stock Option Plans



Second Stock Option Plan



As part of the capital
increase and acquisition of Grupo Telereunion in July 2006, we amended the executive stock option plan granted to our officers
for the services rendered during the years 2002, 2003 and 2004.



87







The plan is divided
into five levels, depending on the ranking of the different members of management. The first and second level includes the highest
management levels and is contingent upon achieving certain targets that our board of directors set every year. The participants
of the three following levels are guaranteed a minimum amount of options. The granting of options for the members of the last
level, which is comprised of the junior management, is discretionary. The underlying security of the options of this executive
option plan is comprised of Series A common stock.



Once options are granted,
holders can immediately exercise 25% of such options. The remaining 75% of the options become exercisable pro rata over the succeeding
three−year period. In the event the officer ceases to work for us, all options not exercised are forfeited. Options expire
five years from the date of grant.



As of December 31,
2009 our board of directors and shareholders had reserved an aggregate of 11,000,000 shares to be issued upon the exercise of
options granted under the new executive stock option plan, as well as for a special plan granted to the chairman of our board
of directors. As of December 31, 2009, options to purchase 42,382,206 shares had been granted, of which options to purchase 26,787,494
shares were fully exercisable. The exercise price of the Second Executive Stock Option Plan is U.S.$0.31 per option. The previous
amounts includes options to purchase 7,569,007 shares pursuant to arrangements with certain of our key officers that, upon a change
of control or an initial public offering, thus becoming fully exercisable without restriction on October 2007 because of the initial
public offering. The exercise price of these options was U.S.$0.01 per option.



On January 28, 2010,
by means of resolutions adopted by the General Extraordinary and Ordinary Shareholders Meetings, the shareholders’ ratified
the Executive Incentive Plan and the compensation or emoluments awarded to directors and members of our different committees.
In both cases the plan is comprised of a part payable in cash and a part payable in our stock options. Under this plan there have
not been any options granted, due to the fact that the conditions required at the Shareholder’s Meeting to grant the incentives
were not met when they were measured on December 31, 2011.



Third Stock Option Plan



On April 20, 2012,
by means of resolutions adopted at our General Extraordinary and Ordinary Shareholders Meetings, our shareholders ratified a new
executive incentive plan and the compensation or emoluments awarded to directors and members of our different committees and approved
a capital increase through the issuance of 25,800,000 Series A shares to be held in treasury. The plan is composed of part cash
payment and a part stock options. As of April 30, 2013, officers and employees have exercised 16,187,715 Series A shares as part
of the plan.



Director and Officer Indemnification and Limitation on Liability



Our bylaws provide
that none of our directors, members of committees of our board of directors or officers hall be liable to us or our stockholders
for (1) any action taken or failure to act which was in good faith and was not a violation of a material provision of our bylaws
and which was not grossly negligent, willfully malfeasant or knowingly in violation of the Mexican Securities Market Law, (2)
if applicable, any action or inaction that is based upon the opinion or advice as to legal matters of legal counsel or as to accounting
matters of accountants selected by any of them with reasonable care the competence of which is not the subject of a reasonable
doubt and (3) any action or omission that was, to the best knowledge of the board member, committee member or officer, the most
adequate choice or where the adverse effects of such action or omission were not foreseeable, in each case based upon the information
available at the time of the decision. To the extent a director, committee member or officer is found to have acted in bad faith,
with gross negligence or with willful malfeasance in connection with an action or failure to act in good faith which is not a
violation of the material provisions of the bylaws, such director, committee member or officer may be liable for damages and losses
arising under Mexican law.



Our bylaws also provide
that each director, member of a committee of the board of directors and officer who is made or threatened to be made a party to
a proceeding as a result of his or her provision of services to us will be indemnified and held harmless by us to the fullest
extent permitted by Mexican law against all expenses and liabilities incurred in connection with service for or on behalf of us.
There is doubt as to whether, under Mexican law, this indemnification will be enforceable in respect of the breach of the duty
of loyalty. However, in the event that a director, officer or committee member initiated a proceeding, they will only be indemnified
in connection with such proceeding if it was authorized by our board of directors.



88







We may maintain insurance
policies under which our directors and certain officers are insured, subject to the limitations of such policies, against certain
expenses in connection with the defense of, and certain liabilities which might be imposed as a result of, actions, suits or proceedings
to which they are parties by reason of being or having been such directors or officers.



Unless otherwise determined
by our board of directors, expenses incurred by any of our directors, members of a committee or officers in defending a proceeding
shall be paid by us in advance of such proceeding’s final disposition subject to our receipt of an undertaking, in form
and substance satisfactory to our board of directors, to repay such amount if it shall ultimately be determined that such person
is not entitled to be indemnified by us.



Persons which are
not covered by the foregoing indemnification rights and who are or were our employees or agents, or who are or were serving at
our request as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, may also be
indemnified to the extent authorized at any time or from time to time by our board of directors. Such expenses related to a proceeding
incurred by such other employees and agents may also be paid in advance of a proceeding’s final disposition, subject to
any terms and conditions on such payment as our board of directors deems appropriate.



Authority of the Board of Directors



The management of
our company is entrusted to the board of directors and the chief executive officer. The board of directors sets forth the guidelines
and general strategy for the conduct of our business and supervises the execution thereof.



Pursuant to the Mexican
Securities Market Law, the board of directors must approve, among other matters:



| | • | our general strategy;
| | - | ---------------------



| | • | guidelines for the use of corporate assets;
| | - | -------------------------------------------



| | • | on an individual basis, any transactions with related parties,
    subject to certain limited exceptions;
| | - | ---------------------------------------------------------------------------------------------------------



| | • | unusual or non-recurrent transactions and any transactions that
    imply the acquisition or sale of assets with a value equal to or exceeding 5% of our consolidated assets or the provision
    of collateral or guarantees or the assumption of liabilities equal to or exceeding 5% of our consolidated assets;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the appointment or removal of the chief executive officer;
| | - | ----------------------------------------------------------



| | • | accounting and internal control policies; and
| | - | ---------------------------------------------



| | • | policies for disclosure of information.
| | - | ---------------------------------------



The Mexican Securities Market
Law also imposes duties of care and of loyalty on directors.



| | C. | Board practices
| | -- | ---------------



The members of our board of directors are
elected annually at our ordinary general meeting of shareholders. All board members hold the positions for one year and may be
reelected. The current members of the board of directors were reelected or appointed at the general annual ordinary shareholders’
meeting held on April 26, 2013.



Our executive officers are appointed by
the board of directors for an indefinite term and may be removed by the Board at will, provided the corresponding severance payments
are made in accordance with Mexican labor law and the applicable labor contract.



89







Members of the board of directors are not
entitled to any benefits upon termination.



Committees



In connection with
the completion of our initial public offering in October 2007, our board of directors established an audit and corporate practices
committee and an operating advisory committee to assist the board of directors to manage our business.



Audit and Corporate Practices Committee



Our board of directors
has established an audit and corporate practices committee responsible for advising the board on, and overseeing, our financial
condition and matters regarding accounting, taxation and release of financial information, as well as to oversee and mitigate
the risks of doing business in general and with related parties such as our shareholders, and to supervise the compliance of laws
and securities regulations that apply to us.



The charter of our
audit and corporate practices committee contains the rules of operation of such committee. Under the charter, the audit and corporate
practices committee must be composed of at least three members. Each member of the audit and corporate practices committee (including
its president) must be independent under the rules of the Exchange Act and the Mexican Securities Market Law.



The audit and corporate
practices committee is comprised of Juan Miguel Gandoulf Castellanos (who acts as Chairman of the committee), Adrian Aguirre Gomez,
Jose Eduardo Molina Llovera, Jorge Garcia Segovia and Juan Jaime Petersen Farah, all of whom are independent under the rules of
the NYSE, Rule 10A−3 promulgated under the Exchange Act and the Mexican Securities Market Law. If requested, our external
independent auditor and certain of our executives, including our chief financial officer, will be required to participate in each
meeting, although they are not formal members of the committee.



The audit and corporate
practices committee’s principal role is to supervise the execution of related party transactions, require the chief executive
officer to prepare reports when deemed necessary, supervise the activities of the chief executive officer and provide an annual
report to the board of directors.



The mandate of the
audit and corporate practices committee is to establish and review procedures and controls to ensure that the financial information
we distribute is useful, appropriate, reliable, and accurately reflects our financial position. The mandate of our audit and corporate
practices committee includes the following functions, among others:



| | · | advise
                                                                                                               the board of directors
                                                                                                               with respect to
                                                                                                               matters assigned
                                                                                                               to it under the
                                                                                                               Mexican Securities
                                                                                                               Market Law, including:
                                                                                                               (a) our internal
                                                                                                               control and internal
                                                                                                               audit guidelines,
                                                                                                               (b) our accounting
                                                                                                               policies by referenced
                                                                                                               to financial reporting
                                                                                                               standards, (c)
                                                                                                               our financial statements,
                                                                                                               (d) the appointment
                                                                                                               of our external
                                                                                                               auditors, and (e)
                                                                                                               transactions that
                                                                                                               either are outside
                                                                                                               the ordinary course
                                                                                                               of our business
                                                                                                               or, in relation
                                                                                                               to the results
                                                                                                               of the immediately
                                                                                                               preceding fiscal
                                                                                                               quarter, constitute
                                                                                                               (i) the acquisition
                                                                                                               or disposition
                                                                                                               of assets or (ii)
                                                                                                               the provision of
                                                                                                               guaranties or the
                                                                                                               assumption of liabilities,
                                                                                                               in each case, equal
                                                                                                               to or greater than
                                                                                                               5% of our consolidated
                                                                                                               assets;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | evaluate,
                                                                                                               analyze and supervise
                                                                                                               the work performed
                                                                                                               by our external
                                                                                                               auditors, including
                                                                                                               (a) review with
                                                                                                               them our annual
                                                                                                               and interim financial
                                                                                                               statements; (b)
                                                                                                               approve non−audit
                                                                                                               services provided
                                                                                                               by them; (c)resolve
                                                                                                               any disagreements
                                                                                                               between them and
                                                                                                               management; and
                                                                                                               (d) ensure their
                                                                                                               independence and
                                                                                                               objectivity;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | discuss
                                                                                                               our financial statements
                                                                                                               with the chief
                                                                                                               financial officer
                                                                                                               for their preparation
                                                                                                               and review and
                                                                                                               issue a recommendation
                                                                                                               to the board of
                                                                                                               directors with
                                                                                                               respect to committee’s
                                                                                                               approval; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | inform
                                                                                                               the board of directors
                                                                                                               of the status of
                                                                                                               the internal control
                                                                                                               and internal audit
                                                                                                               system, including
                                                                                                               any detected irregularities.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



90







Operating Advisory Committee



Our operating advisory
committee is responsible for advising the board on and overseeing our operations. In April 26, 2013, the shareholders’ meeting
decided to reelected all the members of the Operating Advisory Committee. This committee is comprised of Mr. Jacques Gliksberg,
Adrian Aguirre Gomez and Eduardo Vazquez.



D. Employees



See “Item 4. Information
on the Company — B. Business Overview — Our Company — Employees.”



E. Share ownership



Beneficial ownership percentages calculated in the table below
are based on 806,006,544 shares of Series A common stock issued and outstanding as of April 30, 2013.



|                                                             |  | Series A Common Stock |            
|------------------------------------------------------------ |  | --------------------- | -----------
|                                                             |  | Beneficial Ownership  |            
|Shareholders                                                 |  | Number                |            
|Jacques Gliksberg(1)                                         |  |                       | 319,568,826
|Marco Viola(1)**                                             |  |                       | 319,794,345
|Eduardo Vázquez (2)                                          |  |                       | 60,027,412 
|Jesus Gustavo Martinez (2)**                                 |  |                       | 60,027,412 
|Efrain Ruvalcaba (2)**                                       |  |                       | 60,027,412 
|Adrián Aguirre Gómez                                         |  |                       | *          
|Maria Guadalupe Aguirre Gómez**                              |  |                       | *          
|Rodrigo Guerra Botello                                       |  |                       | *          
|Salvador Alvarez                                             |  |                       | *          
|Lorenzo Barrera Segovia                                      |  |                       | *          
|Juan Jaime Petersen Farah                                    |  |                       | *          
|Jorge Garcia Segovia                                         |  |                       | *          
|Eduardo Molina                                               |  |                       | *          
|All executive officers and directors as a group (14 persons) |  |                       | 379,821,757










(1) The shares of Series A common stock
indirectly owned by Mr. Gliksberg and Mr. Viola are beneficially owned by (a) the Nexus−Maxcom Holdings entities and (b)
the Bank of America, as both are managers of Nexus Partners I, LLC. The shares of Series A Common Stock directly owned by Nexus
Partners I, LLC are owned indirectly owned by Mr. Gliksberg and Mr. Viola, its managers. See “Principal Shareholders and
Related Party Transactions.”

(2) Alternate director.

(3) Includes shares of Series A common
stock beneficially owned, directly or indirectly, by the Vazquez family.

(4) Holders own less than one percent
of our Series A common stock.



ITEM 7. MAJOR SHAREHOLDERS
AND RELATED PARTY TRANSACTIONS



A.   Major Shareholders



The following table
sets forth information with respect to beneficial ownership of our capital stock, including shares underlying CPOs as of the dates
of their last Schedule 13G/A filed, by each person that is a beneficial owner of 5% or more of our outstanding shares of capital
stock, other than any persons described in Item 6E above.



Beneficial ownership
percentages calculated in the table below are based on 789,818,829 shares of Series A common stock issued and outstanding as of
December 31, 2012.



91









|                               |  | Series A Common Stock |            
|------------------------------ |  | --------------------- | -----------
|                               |  | Beneficial Ownership  |            
|Shareholders                   |  | Number                |            
|Bank of America Corporation(1) |  |                       | 319,794,345
|Nexus Maxcom Holdings (1)      |  |                       | 319,794,345





|(1) | Based upon information set forth in the Schedule
    13G/A filed on February 14, 2012, includes shares of Series A common stock beneficially owned, directly or indirectly by the
    following reporting persons: Nexus-Maxcom Holdings I, LLC, Nexus Partners I, LLC, Nexus-Banc of America Fund II, L.P., Nexus
    Partners II, L.P., Jacques Gliksberg, Marco Viola. Additionally, Bank of America Corporation has retained Nexus Partners and
    Messrs. Gliksberg and Viola to manage all shares of Series A Common Stock beneficially owned by BAS Capital Funding Corporation
    (“BAS Capital”), which is the direct beneficial owner of 3,055,035 shares of Series A Common Stock, or approximately
    0.4% of the total outstanding Series A Common Stock, BankAmerica Investment Corporation (“BAIC”), which is the
    direct beneficial owner of 338,347 shares of Series A Common Stock, or approximately 0.04% of the total outstanding Series
    A Common Stock, BASCFC-Maxcom Holdings I, LLC (“BASCFC”), which is the direct beneficial owner of 85,741,824 shares
    of Series A Common Stock, or approximately 10.9% of the total outstanding Series A Common Stock and Nexus-Maxcom Holdings.
    As a result, Nexus Partners and Messrs. Gliksberg and Viola may be deemed to be the indirect beneficial owners of the shares
    beneficially owned directly by BAS Capital, BAIC, BASCFC and Nexus-Maxcom Holdings.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In accordance
with a report issued by The Bank Of New York, as of March 31, 2013 there were  2,862,278 ADSs being traded in the NYSE,
through 12 record holders.



Significant
Changes in Share Ownership



On July 21, 2006,
we reached an agreement with certain entities controlled by the Grupo VAC Investors to acquire Grupo Telereunión. As a
result of these transactions, the Grupo VAC Investors became owners of 16.34% of our then -outstanding equity securities. There
have been no other significant changes in the percentage share ownership of our shareholders who hold more than 5% of our capital
stock during the last three years.



Differences in Voting Rights



With respect to any
particular class of our securities, the voting rights of our major shareholders, directors and executive officers is not different
than the voting rights of other holders of the same class of securities.



Security holders Agreement



On July 20, 2006,
in connection with the acquisition of Grupo Telereunión, we entered into the Third Amended and Restated Security holders
Agreement among the holders of our previously outstanding Series A, Series B and Series N shares. The primary purpose of the security
holders agreement was to confirm the rights and obligations under the bylaws of each of the parties to such agreement. The security
holders agreement was terminated in connection with our initial public offering in October 2007.



Registration Rights Agreement



In connection with
the termination of the security holders agreement described above, on October 19, 2007 we entered into a registration rights agreement
with certain of our shareholders, including certain entities associated with Bank of America Corporation, and the Grupo VAC Investors
pursuant to which we agreed to register for sale under the Securities Act shares of our Series A common stock and/or CPOs held
by them and, in the case of the shares and/or CPOs currently held by certain entities associated with Bank of America Corporation,
certain of their transferees to the extent so designated by BAS Capital Funding Corporation, who we refer to as the BA Transferees,
in the circumstances described below. This agreement provides some holders of our Series A common stock and/or CPOs with the right
to require us to file a registration statement and provides stockholders who are parties to the agreement with the right to include
Series A common stock and/or CPOs owned by them in a registration statement under most other circumstances. The following describes
such rights and circumstances.



92







Demand Rights.BAS Capital Funding Corporation, Nexus Partners I, LLC, Nexus and the BA Transferees have the right to require us, from
time to time, to register shares or CPOs held by them. We call the right to require us to register shares or CPOs a demand right
and the resulting registration a demand registration. BAS Capital Funding Corporation, Nexus Partners I, LLC, Nexus and the BA
Transferees may make an unlimited number of such demands for registration on Form F-1 or, if available to us, on Form F-3. Additionally,
following the sixth anniversary of the completion of our initial public offering, the representative of the Grupo VAC Investors
may make an unlimited number of such demands for registration on Form F-1 or, if available to us, on Form F-3.



Piggyback Rights.Shareholders who are party to the registration rights agreement can request to participate in, or “piggyback”
on, registrations of any of our securities for sale by us or by a third party. We call this right a piggyback right and the resulting
registration a piggyback registration.



Conditions and
Limitations; Expenses.The registration rights outlined above will be subject to conditions and limitations, including
the right of the underwriters to limit the number of shares to be included in a registration and our right to delay or withdraw
a registration statement under specified circumstances. In addition, if so requested by the underwriters, holders of securities
with registration rights will not be allowed to make any public sale of our equity securities (including sales under Rule 144)
during a period that begins thirty days before the effectiveness of a registration statement and that ends, in the case of our
initial public offering, 180 days after our initial public offering and, in any other underwritten offering in which registration
rights were exercised, ninety days after effectiveness.



Other than underwriting
discounts and commissions and brokers’ commissions, we will pay all registration expenses in connection with a registration,
as well as all fees and expenses of BAS Capital Funding Corporation, Nexus Partners I, LLC, Nexus and the BA Transferees and certain
entities associated with Bank of America Corporation in connection with such demand or piggyback registration and reasonable fees
and disbursements of one counsel for all other holders who are party to the registration rights agreement and included in such
registration.



Subject to the conclusion
of the recapitalization transactions, the Registration Agreement shall automatically be terminated.



B.  Related party transactions



General policy



Our general policy
is that we will not, and will not permit our subsidiaries to, enter into any contract or transaction with or for the benefit of
any affiliate (other than transactions between us and our subsidiaries), which is not at a price and on other terms at least as
favorable to Maxcom or our subsidiaries as those which could be obtained on an arm’s-length basis from an unaffiliated third
party.



Acquisition
of Sierra Comunicaciones Globales



In November 2007,
we acquired all the equity capital of Sierra Comunicaciones Globales, S. A. de C. V. (Sierra). The purchase price for the shares
was U.S.$3.0 million, U.S.$1.75 million of which was paid on November 15, 2007, and the remaining U.S.$1.25 million was paid on
November 10, 2008. In addition, we exercised a right of first refusal granted by Grupo VAC in connection with the Grupo Telereunión
acquisition (see “Item 7. Major Shareholders and Related Party Transactions - A. Major Shareholders and Share Ownership
— Significant Changes in Share Ownership”).



C.  Interests of experts and counsel



Not applicable.



93







ITEM 8. FINANCIAL
INFORMATION



A.  Consolidated statements and other financial information



Financial Statements



See Item 18.



Legal Proceedings



See “Item 4.
Information on the Company — B. Business Overview — Legal Matters and Administrative Proceedings.”



Dividend
Policy



See “Item 5.
Operating and Financial Review and Prospects — B. Liquidity and capital resources - Dividend policy.”



B.  Significant changes



Designation
of Guarantor.



On January 20, and
November 16, 2011, Celmax Movil, S.A. de C.V., and Servicios MSF, S.A. de C.V., were designated as new guarantors in accordance
with the indenture dated December, 2006 governing our senior notes due 2014.



Formation of our Board of Directors and Audit
and Corporate Practices Committee.



On April 26, 2013, through a General Shareholders
Meeting, the shareholders of Maxcom ratified the appointment of all the directors of the Company.



Mr. Jacques Gliksberg was reelected as
Chairman of the Board of Directors of the Company, Mr. Adrian Aguirre was reelected as Vice chairman of the Board of Director.



All the members of the Audit Committee
and the Operating Advisory Committee were reelected.



New appointment
of our Chief Executive Officer.



On February 23, 2011,
the Board of Directors accepted the resignation of Mr. William Nazaret as Chief Executive Officer and appointed Mr. Salvador Álvarez
Valdés as new Chief Executive Officer who took position to the office on March 7, 2011.



ITEM 9. THE OFFER
AND LISTING



Trading Market



In connection with
our initial public offering on October 24, 2007, our American Depositary Shares, or ADSs, each representing seven (7) Ordinary
Participation Certificates (CPOs) in Mexico, were listed and commenced trading on October 19, 2007 on New York Stock Exchange
under the symbol “MXT” and on the Mexican Stock Exchange under the symbol “MAXCOM CPO”.



The table below shows
the reported highest and lowest market prices for our CPOs and ADSs on the Mexican Stock Exchange and the New York Stock Exchange
for the periods indicated below:



94







|                                          |  | Mexican Stock Exchange (Mexican pesos per CPO) |       |  | New York Stock Exchange (U.S. dollars per ADS) |    
|----------------------------------------- |  | ---------------------------------------------- | ----- |  | ---------------------------------------------- | ---
|                                          |  | High                                           |       |  | Low                                            |    
|Annual Highs and Lows                     |  |                                                |       |  |                                                |    
|2013 (through
    May 13, 2013)           |  | Ps.                                            | 5.70  |  |                                                | Ps.
|2012                                      |  |                                                | 4.19  |  |                                                |    
|2011                                      |  |                                                | 6.77  |  |                                                |    
|2010                                      |  |                                                | 11.74 |  |                                                |    
|2009                                      |  |                                                | 12.40 |  |                                                |    
|2008                                      |  |                                                | 23.70 |  |                                                |    
|Quarterly Highs and Lows:                 |  |                                                |       |  |                                                |    
|2013:                                     |  |                                                |       |  |                                                |    
|First Quarter                             |  | Ps.                                            | 5.70  |  |                                                | Ps.
|Second Quarter (through
    May 13, 2013) |  |                                                | 5.02  |  |                                                |    
|2012:                                     |  |                                                |       |  |                                                |    
|First Quarter                             |  | Ps.                                            | 3.87  |  |                                                | Ps.
|Second Quarter                            |  |                                                | 3.30  |  |                                                |    
|Third Quarter                             |  |                                                | 3.18  |  |                                                |    
|Fourth Quarter                            |  |                                                | 3.79  |  |                                                |    
|2011:                                     |  |                                                |       |  |                                                |    
|First Quarter                             |  | Ps.                                            | 6.77  |  |                                                | Ps.
|Second Quarter                            |  |                                                | 6.30  |  |                                                |    
|Third Quarter                             |  |                                                | 4.94  |  |                                                |    
|Fourth Quarter                            |  |                                                | 4.20  |  |                                                |    
|2010:                                     |  |                                                |       |  |                                                |    
|First Quarter                             |  | Ps.                                            | 12.10 |  |                                                | Ps.
|Second Quarter                            |  |                                                | 9.11  |  |                                                |    
|Third Quarter                             |  |                                                | 8.06  |  |                                                |    
|Fourth Quarter                            |  |                                                | 7.27  |  |                                                |    
|2009:                                     |  |                                                |       |  |                                                |    
|First Quarter                             |  | Ps.                                            | 8.35  |  |                                                | Ps.
|Second Quarter                            |  |                                                | 6.90  |  |                                                |    
|Third Quarter                             |  |                                                | 7.50  |  |                                                |    
|Fourth Quarter                            |  |                                                | 12.40 |  |                                                |    
|2008:                                     |  |                                                |       |  |                                                |    
|First Quarter                             |  | Ps.                                            | 20.39 |  |                                                | Ps.
|Second Quarter                            |  |                                                | 23.70 |  |                                                |    
|Third Quarter                             |  |                                                | 18.91 |  |                                                |    
|Fourth Quarter                            |  |                                                | 12.86 |  |                                                |    
|Monthly 2013:                             |  |                                                |       |  |                                                |    
|January                                   |  | Ps.                                            | 4.48  |  |                                                | Ps.
|February                                  |  |                                                | 5.09  |  |                                                |    
|March                                     |  |                                                | 5.70  |  |                                                |    
|April                                     |  |                                                | 5.02  |  |                                                |    
|May (through May 13, 2013)                |  |                                                | 4.50  |  |                                                |    
|Monthly 2012:                             |  |                                                |       |  |                                                |    
|January                                   |  | Ps.                                            | 3.73  |  |                                                | Ps.
|February                                  |  |                                                | 3.87  |  |                                                |    
|March                                     |  |                                                | 3.46  |  |                                                |    
|April                                     |  |                                                | 3.30  |  |                                                |    
|May                                       |  |                                                | 2.98  |  |                                                |    
|June                                      |  |                                                | 2.75  |  |                                                |    
|July                                      |  |                                                | 3.14  |  |                                                |    
|August                                    |  |                                                | 2.92  |  |                                                |    
|September                                 |  |                                                | 3.18  |  |                                                |    
|October                                   |  |                                                | 4.19  |  |                                                |    
|November                                  |  |                                                | 3.79  |  |                                                |    
|December                                  |  |                                                | 4.16  |  |                                                |    
|Monthly 2011:                             |  |                                                |       |  |                                                |    
|January                                   |  | Ps.                                            | 6.55  |  |                                                | Ps.
|February                                  |  |                                                | 6.77  |  |                                                |    
|March                                     |  |                                                | 6.39  |  |                                                |    
|April                                     |  |                                                | 6.30  |  |                                                |    
|May                                       |  |                                                | 5.41  |  |                                                |    
|June                                      |  |                                                | 4.96  |  |                                                |    
|July                                      |  |                                                | 4.94  |  |                                                |    
|August                                    |  |                                                | 4.30  |  |                                                |    
|September                                 |  |                                                | 3.79  |  |                                                |    
|October                                   |  |                                                | 2.92  |  |                                                |    
|November                                  |  |                                                | 4.20  |  |                                                |    
|December                                  |  |                                                | 3.74  |  |                                                |    
|Monthly 2010:                             |  |                                                |       |  |                                                |    
|January                                   |  | Ps.                                            | 12.10 |  |                                                | Ps.
|February                                  |  |                                                | 10.85 |  |                                                |    
|March                                     |  |                                                | 10.55 |  |                                                |    
|April                                     |  |                                                | 9.40  |  |                                                |    
|May                                       |  |                                                | 8.22  |  |                                                |    
|June                                      |  |                                                | 8.30  |  |                                                |    
|July                                      |  |                                                | 6.95  |  |                                                |    
|August                                    |  |                                                | 8.06  |  |                                                |    
|September                                 |  |                                                | 7.47  |  |                                                |    
|October                                   |  |                                                | 7.00  |  |                                                |    
|November                                  |  |                                                | 7.27  |  |                                                |    
|December                                  |  |                                                | 7.11  |  |                                                |    
|Monthly 2009:                             |  |                                                |       |  |                                                |    
|January                                   |  | Ps.                                            | 8.35  |  |                                                | Ps.
|February                                  |  |                                                | 7.50  |  |                                                |    
|March                                     |  |                                                | 6.19  |  |                                                |    
|April                                     |  |                                                | 6.50  |  |                                                |    
|May                                       |  |                                                | 6.90  |  |                                                |    
|June                                      |  |                                                | 6.53  |  |                                                |    
|July                                      |  |                                                | 5.80  |  |                                                |    
|August                                    |  |                                                | 7.28  |  |                                                |    
|September                                 |  |                                                | 7.50  |  |                                                |    
|October                                   |  |                                                | 7.60  |  |                                                |    
|November                                  |  |                                                | 8.70  |  |                                                |    
|December                                  |  |                                                | 12.40 |  |                                                |    



95







Trading on the Mexican Stock Exchange



The Mexican Stock
Exchange, located in Mexico City, is the only stock exchange in Mexico. Operating continuously since 1907, The Mexican Stock Exchange
is organized as a corporation with variable capital, or sociedad anónima bursátil de capital variable. Securities
are traded on the Mexican Stock Exchange from 8:30 am to 3:00 pm Mexico City time, each business day. Since January 1999, all
trading on the Mexican Stock Exchange has been conducted electronically. The Mexican Stock Exchange operates a system of automatic
suspension of trading in shares of a particular issuer as a means of controlling excessive price or volume volatility. Under current
regulations, this system applies to ADSs. However, the Mexican Stock Exchange may take into account any suspension measures that
may or may not have been taken by the New York Stock Exchange in respect of the ADSs, and may resolve not to impose a suspension
of trading of our shares.



96







Settlement is
effected two trading days after a share transaction on the Mexican Stock Exchange. Deferred settlement even by mutual agreement
is not permitted without approval of the CNBV. Most securities traded on the Mexican Stock Exchange are on deposit with S.D.
Indeval, Institución para el Deposito de Valores, S.A. de C.V.,or Indeval, a privately owned securities depositary
that acts as a clearinghouse, depositary and custodian, as well as a settlement, transfer and registration agent for Mexican Stock
Exchange transactions, eliminating the need for physical transfer of securities.



Although the Mexican
Securities Market Law provides for the existence of an over-the-counter market, no such market for securities in Mexico currently
exists.



ITEM 10. ADDITIONAL
INFORMATION



A. Share capital



Not applicable.



B.  Memorandum and articles of association



General



Maxcom was incorporated
on February 28, 1996, under the name “Amaritel, S.A. de C.V.” as a variable capital corporation (sociedad anónima
de capital variable) established under the laws of Mexico. Maxcom was registered in the Public Registry of Commerce of the Federal
District of Mexico under folio no. 210585 on June 11, 1996. Amaritel changed its name to “Maxcom Telecomunicaciones, S.A.
de C.V.” on February 9, 1999.



Maxcom was formed
for the purpose of installing, operating and exploiting a public telecommunications network granted by the Mexican federal government
for the provision of local and long-distance telephone services.



Maxcom’s corporate
purposes are found under Article Two of its bylaws. The duration of Maxcom’s existence under our bylaws is indefinite.



The following table sets forth
our capital structure as of March 31, 2013:



|Class of Shares       |  | Number of Shares |             |  | % of Total Capital Structure | 
|--------------------- |  | ---------------- | ----------- |  | ---------------------------- | 
|Series A common stock |  |                  | 806,006,544 |  |                              | 
|Total                 |  |                  | 806,006,544 |  |                              | 



We have obtained an
authorization from the Mexican Foreign Investment Bureau (Dirección General de Inversión Extranjera) to increase
our ability to issue neutral investment shares for up to 95% of our total capital stock and to simplify our equity structure.
As of March 31, 2013, we have issued neutral investment shares representing approximately 91.82% of our total capital stock. Our
Series A common stock, which may only be subscribed, paid for and held by Mexican investors, collectively represent about 51%
of our voting stock.



DESCRIPTION OF CAPITAL STOCK



The following information
describes our outstanding capital stock and provisions of our bylaws. This description may not contain all of the information
that is important to you. To understand them fully, you should read our bylaws, a copy of which is filed with the SEC as an exhibit
to the registration statement filed with the SEC on October 17, 2007. The following descriptions are qualified in their entirety
by reference to the bylaws and to applicable provisions of Mexican law.



97







Outstanding Capital Stock



Because we are a variable
capital stock corporation, our capital stock must have a fixed portion and may have a variable portion, both of which will be
represented by shares of Series A common stock. Our outstanding capital stock consists of 1,528,827 shares of Series A common
stock representing the fixed portion of our capital stock and 804, 477,717 shares of Series A common stock representing the variable
portion of our capital stock.



Changes to Capital Stock



The fixed portion
of our capital stock may be increased or decreased by a resolution adopted at a general extraordinary shareholders’ meeting
and upon amendment of our bylaws. The variable portion of our capital stock may be increased or decreased by a resolution adopted
at a general ordinary shareholders’ meeting without amending our bylaws. Increases or decreases in the fixed or variable
portion of the capital stock must be recorded in our registry of capital variations. New shares (other than then existing treasury
shares) cannot be issued unless the then-issued and outstanding shares have been paid in full.



Registration and Transfer



Our shares of Series
A common stock are evidenced by share certificates in registered form. Our shareholders that hold our shares of Series A common
stock directly (and not through CPOs) may hold their shares in the form of physical certificates. We maintain a stock registry,
and, in accordance with Mexican law, only those holders listed in the stock registry and those holding certificates issued by
S.D. Indeval Institución para el Depósito de Valores, S.A. de C.V., or Indeval, a privately owned securities depositary
that acts as a clearinghouse, depositary, and custodian, as well as a settlement, transfer, and registration agent for Mexican
Stock Exchange transactions, eliminating the need for physical transfer of securities, the depositary for the CPOs, are recognized
as our shareholders. Pursuant to Mexican law, any transfer of our shares effected by the transfer of a physical certificate must
be registered in our stock registry to be valid.



Shareholders’ Meetings



General shareholders’
meetings may be general ordinary shareholders’ meetings or general extraordinary shareholders’ meetings. Shareholders
may also hold special meetings for matters affecting a single class of capital stock. Under Mexican law and our bylaws, shareholders’
meetings may be called by:



| | • | our board of directors and the president or secretary of the
    board;
| | - | -----------------------------------------------------------------------



| | • | shareholders representing at least 10% of our outstanding capital
    stock who request the board of directors or the audit and corporate practices committee to call a shareholders meeting;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | a Mexican court of competent jurisdiction, in the event the
    board of directors does not comply with a valid request of the shareholders described immediately above;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the audit and corporate practices committee; and
| | - | ------------------------------------------------



| | • | any shareholder, provided that no annual ordinary meeting has
    been held for two consecutive years or the annual shareholders meeting did not to address the matters required to be addressed
    in an annual shareholders’ meeting.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Calls for shareholders’
meetings will be required to be published in any two of the following publications: Reforma newspaper (business section), El Financiero
newspaper, the Official Gazette of the Federal District, the Official Gazette of the Federation or in a newspaper of general circulation
of our corporate domicile, at least 15 days before the scheduled date of the shareholders’ meeting in the case of first
calls, and at least 5 days in advance in the case of second and subsequent calls. Calls for shareholders’ meetings must
set forth the place, date and time of the meeting and the matters to be addressed at the meeting. From the date on which a call
is published until the date of the corresponding meeting, we must make available to our shareholders all relevant information
at our executive offices. To attend a shareholders’ meeting, potential attendees must hold shares of our stock that are
registered in their name in the stock registry, present evidence of the deposit of certificates evidencing shares of our stock
owned by them with a financial institution or deposit such certificates with our secretary, or present a proxy issued by the CPO
trustee, coupled with certificates issued by the custodian of the holder, together with an Indeval certification. See “—
Voting Rights,” “Description of the CPO Trust” and “Description of American Depositary Shares.”



98







General Ordinary
Shareholders’ Meetings.General ordinary shareholders’ meetings are those called to discuss any issues not reserved
for extraordinary meetings. We are required to hold a general ordinary shareholders’ meeting at least once a year, during
the first four months following the end of our fiscal year, to:



| | • | approve the financial statements for the preceding fiscal year;
| | - | ---------------------------------------------------------------



| | • | elect directors;
| | - | ----------------



| | • | discuss and approve the audit and corporate practices committees,
    the board of directors’ and the chief executive officer’s annual report;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| | • | determine how to allocate net profits for the preceding year
    (including, if applicable, the payment of dividends); and
| | - | --------------------------------------------------------------------------------------------------------------------------



| | • | determine the maximum amount of resources allocated to share
    repurchases.
| | - | -----------------------------------------------------------------------------



In addition, any transaction
representing 5% or more of our consolidated assets during any fiscal year must be approved by our shareholders.



Holders of at least
50% of our issued and outstanding voting stock must be present, in person or by proxy, to satisfy the attendance quorum requirements
for a general ordinary shareholders’ meeting. Assuming a quorum is present, resolutions may be approved by a majority of
the voting capital stock represented at a general ordinary shareholders’ meeting. If the attendance quorum is not met upon
the first call of a general ordinary shareholders’ meeting, a subsequent general ordinary shareholders’ meeting may
be called during which resolutions may be approved by the majority of the capital stock present, regardless of the percentage
of outstanding voting stock represented at such meeting.



General Extraordinary
Shareholders’ Meetings.General extraordinary shareholders’ meetings will be those called to consider:



| | • | an extension of our duration or voluntary dissolution;
| | - | ------------------------------------------------------



| | • | an increase or decrease in the fixed portion of our capital
    stock;
| | - | ----------------------------------------------------------------------



| | • | any change in our corporate purpose or nationality;
| | - | ---------------------------------------------------



| | • | any merger or transformation into another type of company;
| | - | ----------------------------------------------------------



| | • | any issuance of preferred stock;
| | - | --------------------------------



| | • | the redemption of shares with retained earnings;
| | - | ------------------------------------------------



| | • | any amendments to our bylaws;
| | - | -----------------------------



| | • | any other matters provided for by law or our bylaws; or
| | - | -------------------------------------------------------



| | • | the cancellation of the registration of our class A common stock
    or CPOs representing such shares at the Mexican National Securities Registry or any stock exchange (except for automated quotation
    systems).
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



99







Holders of at least
75% of our issued and outstanding voting stock must be present, in person or by proxy, to satisfy the attendance quorum requirements
for a general extraordinary shareholders’ meeting. If an attendance quorum is not met upon the first call of a general extraordinary
shareholders’ meeting, a subsequent meeting may be called, at which the attendance quorum requirements will be satisfied
if at least 50% of our issued and outstanding voting capital stock is present, whether in person or by proxy. In either case,
at a general extraordinary shareholders’ meeting, resolutions must be approved by the vote of at least 50% of our issued
and outstanding voting capital stock.



Special Shareholders
Meetings.A special shareholders’ meeting of holders of a single class of our shares may be called if an action is proposed
to be taken that may only affect such class. Because we have a single outstanding class of shares, we do not expect to hold special
shareholders’ meetings. The quorum for a special meeting of shareholders and the vote required to pass a resolution at a
special shareholders’ meeting are identical to those required for extraordinary meetings of shareholders, except that the
calculations are based upon the number of outstanding shares of the class that is the subject of the special meeting of shareholders.



Cumulative Voting.Holders of our class A common stock, or CPOs representing our class A common stock, will not have cumulative voting rights.
However, under the Mexican Securities Market Law, at each shareholders’ meeting at which nominees for director stand for
election, holders of at least 10% of our issued and outstanding voting capital stock are entitled to appoint one member to the
board of directors for each 10% of our issued and outstanding voting capital stock held and, if applicable, one alternate member
of the board of directors in addition to the directors elected by the majority.



Voting Rights



Each outstanding share
of our Series A common stock is entitled to one vote on all matters submitted to the vote of shareholders. Because of the limitations
imposed by Mexico’s Foreign Investment Law and the Federal Telecommunications Law, the voting rights of non-Mexicans who
hold shares of our Series A common stock directly cannot exceed 49% of the total voting rights and non-Mexican holders of CPOs
and ADSs are only entitled to cause the vote of the underlying shares of Series A common stock in limited cases. As a result,
the ability of non- Mexican holders of CPOs and ADSs to direct the vote of underlying shares of Series A common stock is limited.
See “Description of the CPO Trust — Voting Rights with respect of the underlying shares.”



Ownership Restrictions



Our bylaws provide
that, so long as Mexican law does not allow unrestricted foreign ownership of our capital stock, no transfer of shares of Series
A common stock to or acquisition or subscription of shares of Series A common stock by a non-Mexican shall be permitted if such
transfer, acquisition or subscription would result in non-Mexicans holding directly in excess of 49% of the total number of shares
of Series A common stock not held by the CPO trustee. See “- Other Provisions — Foreign Investment Regulations.”



Preemptive Rights



Under Mexican law,
holders of our Series A common stock have preemptive rights for all share issuances or increases except in the cases noted below.
Generally, if we issue additional shares of capital stock, our shareholders will have the right to purchase the number of shares
necessary to maintain their existing ownership percentage. Shareholders must exercise their preemptive rights within the time
period set forth by our shareholders at the meeting approving the relevant issuance of additional shares. This period must continue
for at least 15 days following the publication of notice of the issuance in the Official Gazette of the Federation and in a newspaper
of general circulation in our corporate domicile. Under Mexican law, shareholders cannot waive their preemptive rights in advance
and preemptive rights may not be represented by an instrument that is negotiable separately from the corresponding share. These
preemptive rights do not apply in the case of shares issued in connection with mergers, sales of shares held in our treasury as
a result of repurchases of shares conducted on the Mexican Stock Exchange, the issuance of shares held in treasury previously
approved by our shareholders for issuance in a public offering in accordance with Article 53 of Mexican Securities Market Law,
the issuance of shares upon the conversion of debentures or other similar debt instruments and the issuance of shares to employees,
officers and directors pursuant to stock option plans, stock plans, retirement or similar plans.



100







Dividends



Our board of directors
must submit our financial statements for the previous fiscal year at our annual general ordinary shareholders’ meeting for
approval. Once our shareholders approve our financial statements, they must allocate net profits for the previous fiscal year.
Under Mexican law and our bylaws, prior to any distribution of dividends, 5% of our net earnings must be allocated to a legal
reserve fund, until such legal reserve fund is equal to at least 20% of our paid-in capital stock. Additional amounts may be allocated
to other reserve funds as the shareholders may determine, including the amount allocated for the repurchase of shares. The remaining
balance, if any, constitutes distributable profits that may be distributed as dividends. Cash dividends on shares not held through
Indeval will be paid against delivery of the respective dividend coupon, if any.



Redemption



In accordance with
our bylaws, shares representing our capital stock are subject to redemption in connection with either a reduction of capital stock
or redemption with distributable profits, which in either case must be approved by our shareholders. In connection with a capital
reduction, the redemption of shares shall be made pro rataamong the shareholders, or, if affecting the variable portion
of the capital stock, as otherwise determined in the relevant shareholders’ meeting, but in no case the redemption price
shall be less than the book value of such shares as determined pursuant to our latest balance sheet approved at a general ordinary
shareholders’ meeting. In the case of redemption with retained earnings, such redemption shall be conducted by means of
a tender offer conducted on the Mexican Stock Exchange at prevailing market prices, in accordance with the Mexican Corporations
Law, the Mexican Securities Market Law and our bylaws, or pro rataamong the shareholders.



Dissolution or Liquidation



Upon our dissolution
or liquidation, our shareholders will appoint one or more liquidators at an extraordinary general shareholders’ meeting
to wind up our affairs. Subject to the preferences of other classes or series of stock that may be outstanding at the time, all
fully paid, issued and outstanding shares of our Series A common stock (whether or not underlying CPOs) will be entitled to participate
equally in any liquidating distributions.



Certain Minority
Protections



In accordance with
the Mexican Securities Market Law and the Mexican Corporations Law, our bylaws include a number of minority shareholder protections.
These minority protections include provisions that permit:



| | • | Holders of at least 5% of our outstanding shares, whether directly
    or through CPOs or ADSs, are required to initiate action against some or all of our directors for violations of their duty
    of care or duty of loyalty, for our benefit, in an amount equal to the damages or losses caused to us. Actions initiated on
    these grounds have a five year statute of limitations.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Holders of at least 10% of our outstanding share capital, whether
    directly or through CPOs or ADSs, are able to:
| | - | --------------------------------------------------------------------------------------------------------------------



| | o | request a call for a shareholders’ meeting;
| | - | -------------------------------------------



| | o | request that resolutions with respect to any matter on which
    they were not sufficiently informed be postponed; and                                                                                                                                                                                
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | o | appoint one member of our board of directors and one alternate
    member of our board of directors except that for non-Mexican holders of CPOs or ADSs this right will only be exercisable if
    a majority of our directors are appointed by Mexican investors. See “Description of the CPO Trust.”



| | • | Holders, whether directly or through CPOs or ADSs, of 20% of
    our outstanding share capital to oppose any resolution adopted at a shareholders’ meeting and file a petition for a
    court order to suspend the resolution within 15 days following the adjournment of the meeting at which the action was taken,
    provided that the challenged resolution violates Mexican law or our bylaws, the opposing shareholders either did not attend
    the meeting or voted against the challenged resolution, and the opposing shareholders deliver a bond to the court to secure
    payment of any damages that we may suffer as a result of suspending the resolution in the event that the court ultimately
    rules against the opposing shareholder.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



101







Other Provisions



Foreign Investment
Regulations



Mexico’s Foreign
Investment Law and the Federal Telecommunications Law restrict ownership by non- Mexicans of our capital stock. Mexican shareholders
must hold at least 51% of the shares of Series A common stock directly and the balance may be held by non-Mexican shareholders.
We filed an application with the Mexican Foreign Investment Bureau (Dirección General de Inversión Extranjera)to amend our existing authorization to issue up to 95% of our capital stock in the form of neutral investment and received
authorization allowing that up to 95% of our capital stock can be owned, subscribed or acquired by a banking institution acting
as trustee of a neutral investment trust in accordance with the Foreign Investment Law (which would be the securities underlying
the CPOs). The remaining 5% of our capital stock must be represented directly by shares of Series A common stock, of which at
least 51% must be owned by Mexican holders. As required by Mexican law, our bylaws provide that no transfer to or acquisition
or subscription of shares by a non-Mexican can be made if such transfer, acquisition or subscription would result in non-Mexicans
holding in excess of 49% of the total number of shares of Series A common stock not underlying the CPOs. The CPOs issued may be
freely subscribed, acquired or owned by Mexicans or non-Mexicans. CPOs shall not be counted for purposes of determining the foreign
investment percentage limitations under the Foreign Investment Law and the Federal Telecommunications Law. Non-Mexican investors
will hold shares of Series A common stock indirectly through CPOs or ADSs. See “Description of the CPO Trust” and
“Description of American Depositary Shares.”



Purchase of
Shares by Us



We will be able to
purchase our shares (or CPOs evidencing such shares) through the Mexican Stock Exchange at the prevailing market prices for the
shares at the time of purchase. The economic and voting rights corresponding to repurchased shares will not be exercised during
the period the shares are owned by us and the shares will not be deemed outstanding for purposes of calculation any quorum or
vote at any shareholders meeting. We are not required to create a special reserve for the repurchase of shares and we are not
required to obtain the approval of our board of directors to effect share repurchases. However, the maximum amount that may be
applied for share repurchases must be approved by our shareholders and our board of directors must appoint an individual or group
of individuals for effecting share repurchases. Any share repurchases must be made subject to the provisions of applicable law,
including the Mexican Securities Market Law, and carried out, reported and disclosed in the manner specified by the CNBV. If we
intend to repurchase shares representing more than 1% of our outstanding share capital at a single trading session, we will be
required to inform the public of such intention at least ten minutes before submitting our bid. If we intend to repurchase shares
representing 3% or more of our outstanding share capital during a period of twenty trading days, we will be required to conduct
a public tender offer for such shares.



Purchases of
Shares by our Subsidiaries



Our subsidiaries or
other entities controlled by us may not purchase, directly or indirectly, shares representing our capital stock or shares of companies
or entities that are our shareholders.



Conflicts of
Interest



Under Mexican law,
any shareholder that votes on a transaction in which its interests conflict with our interests may be liable for damages, but
only if the transaction would not have been approved without such shareholder’s vote.



In accordance with
the duty of loyalty imposed on directors, a member of the board of directors with a conflict of interest must disclose such conflict
and abstain from any deliberation or vote in connection therewith. A breach by any member of the board of directors of any such
obligations may result in the director being liable for damages and lost profits.



102







Exclusive
Jurisdiction



Our amended bylaws
will provide that, in connection with any controversy between our shareholders and us, or between our shareholders in connection
with any matter related to us, both we and our shareholders must submit to the jurisdiction of the courts of Mexico City, Federal
District, Mexico.



Withdrawal Rights



In accordance with
applicable Mexican law, only when our shareholders approve a change in our corporate purpose, jurisdiction of organization or
transformation from one corporate form to another, will any shareholder entitled to vote that voted against these matters have
the right to withdraw and receive the book value for its shares as set forth in the last financial statements approved by our
shareholders, provided that the shareholder exercises this right within 15 days after the meeting at which the relevant matter
was approved.



Cancellation
of Registration in the Mexican National Securities Registry



Pursuant to our bylaws,
and as prescribed by the Mexican Securities Market Law, we are required to make a public tender offer for the purchase of stock
held by the minority shareholders in the event that the listing of our shares of Series A common stock or CPOs on the Mexican
Stock Exchange is cancelled, either by our resolution or by an order of the CNBV. Our controlling shareholders will be secondarily
liable for these obligations. A controlling shareholder will be deemed to be a shareholder that holds a majority of our voting
stock, if it has the ability to control the outcome of decisions made at a shareholders or board of directors meeting or has the
ability to appoint a majority of the members of our board of directors. The price at which the stock must be purchased is the
higher of:



| | • | the average quotation price on the Mexican Stock Exchange for
    the 30 days prior to the date of the offer; or
| | - | ----------------------------------------------------------------------------------------------------------------



| | • | the book value, as reflected in the report filed with the CNBV
    and the Mexican Stock Exchange.
| | - | --------------------------------------------------------------------------------------------------



If the tender for
cancellation is requested by the CNBV, it must be initiated within 180 days from the date of the request. If requested by us,
under the Mexican Securities Market Law, the cancellation must be approved by 95% of our shareholders.



Our board of directors
must make a determination with respect to the fairness of the tender offer price, taking into consideration the minority shareholders’
interest, and disclose its opinion. The resolution of the board of directors may be accompanied by a fairness opinion issued by
an expert selected by our audit and corporate practices committee.



Elimination
of Foreign Ownership Restrictions



The provisions of
our bylaws restricting foreign ownership of our capital stock are based upon applicable provisions of the Mexican Foreign Investment
Law and Mexican Federal Telecommunications Law. If these laws are modified so as to permit the unrestricted ownership of our capital
stock and/or control of us by non-Mexicans, the corresponding limitations contained in our bylaws will cease to have effect. Our
bylaws also provide that, in such circumstances, we will use our best efforts to take any and all actions necessary or advisable
to cause the termination of the CPO trust and the distribution of the underlying shares of Series A common stock to the CPO holders
including:



| | • | concurrently with the termination of the CPO trust and distribution
    of the underlying shares, the registration of the Series A common stock with the Mexican National Securities Registry maintained
    by the CNBV and, if necessary, the registration of the distribution of such shares under the Securities Act;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the listing of the shares on the Mexican Stock Exchange;
| | - | --------------------------------------------------------



| | • | those required to modify our bylaws to permit unrestricted foreign
    ownership and/or control of our capital stock (and the CPOs);
| | - | ------------------------------------------------------------------------------------------------------------------------------------



103







| | • | the preparation of proxy materials for and the solicitation
    of shareholder, and CPO holder, approval of the termination of CPO trust and any required or advisable amendments to our bylaws;
    and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | causing all filings, notices, applications and permits related
    to, and obtaining approvals and authorizations of, such termination and distribution.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



The provisions of the CPO trust
agreement contain provisions similar to those of our bylaws.



Forfeiture of
Stock



Under our bylaws,
the current or future foreign shareholders of Maxcom formally undertake with the Ministry of Foreign Relations (Secretaría
de Relaciones Exteriores)to consider themselves as Mexican nationals with respect to the stock of Maxcom that they may acquire
or own, as well as with respect to the properties, rights, concessions, securities or interests owned by Maxcom, or the rights
and obligations derived from the agreements entered with the Mexican authorities to which Maxcom is a party. The current or future
foreign shareholders of Maxcom formally undertake not to invoke the protection of their government, under penalty of forfeiting
such shares to the benefit of the Mexican nation.



Duration and
Dissolution



Our corporate existence
under our bylaws is indefinite. Pursuant to the Mexican Companies Law and our bylaws, we may be dissolved upon the occurrence,
among other things, of any of the following events:



| | • | the impossibility of continuing with our current line of business;
| | - | ------------------------------------------------------------------



| | • | the resolution of our shareholders at an extraordinary general
    shareholders’ meeting;
| | - | -----------------------------------------------------------------------------------------



| | • | the reduction of the number of
        our shareholders to fewer than two; and
| | - | ------------------------------------------------------------------------------
| | • | the loss of two-thirds of our capital stock.                                  



Anti-takeover
Provisions



Our bylaws provide
that no person or group of persons may acquire (or enter into arrangements to control, possess or exercise rights with respect
to) 20% or more of our shares, directly or indirectly, without the prior approval of the board of directors and none of our competitors
may acquire 2% or more of our shares, directly or indirectly, without the prior approval of the board of directors. In both cases,
the approval of the board of directors must be granted or denied within 90 days after notice of the proposed transaction is given
to the board of directors. If our board of directors approves the transaction, the potential purchaser must conduct a tender offer
to purchase 100% of our shares on terms approved by our board of directors.



Our board of directors
may revoke an approval or approve more than a single offer, in light of competing offers or for other circumstances. Our board
of directors may relieve a purchaser from the tender offer obligation at its sole discretion. This restriction will not be applicable
to share transfers resulting from inheritance, transfers to affiliates of a shareholder or distributions to equity holders of
a shareholder.



DESCRIPTION OF THE
CPO TRUST



The following information describes
our outstanding CPOs. This description may not contain all of the information that is important to you. To understand it fully,
you should read the CPO trust agreement, a translated copy of which is filed with the SEC as an exhibit to our registration statement
filed with the SEC on October 17, 2007.



The following descriptions are qualified
in their entirety by reference to the CPO trust agreement and to the applicable provisions of Mexican law.



104







General



CPOs are negotiable
instruments issued by a financial institution acting as trustee under Mexican law. For each outstanding CPO, three shares of our
Series A common stock will be held by the CPO trustee. The CPOs are listed on the Mexican Stock Exchange. The CPO trust has a
maximum term of 50 years. After such period has expired, the CPO trust could either be extended or terminated in accordance with
its terms, or substituted by a new CPO trust. If the CPO trust is terminated, the CPOs will cease to be listed on the Mexican
Stock Exchange and holders of CPOs and ADSs who are non-Mexicans will not be entitled to hold the underlying shares of Series
A common stock directly and will be required to have their interest in the underlying shares of Series A common stock be sold.
See “Description of Capital Stock — Other Provisions — Foreign Investment.”



The CPO trustee, Nacional
Financiera, Sociedad Nacional de Crédito, Institución de Banca de Desarrollo,or NAFIN, will issue the CPOs
pursuant to the following agreements:



| | • | the CPO trust agreement between us and the CPO trustee (and
    persons contributing shares of Series A common stock to the trust from time to time); and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | a CPO trust deed, pursuant to which the CPO trustee will issue
    CPOs in accordance with the CPO trust agreement.
| | - | -------------------------------------------------------------------------------------------------------------------



Under Mexican law
and our bylaws, ownership of our capital stock by non-Mexican investors is limited. However, Mexican law and our bylaws permit
non-Mexicans to hold our shares indirectly through neutral shares or securities. Because the CPO trust qualifies as a neutral
investment trust under the Mexican Foreign Investment Law, ownership of the CPOs by non-Mexican investors is not limited. However,
except in certain circumstances, non- Mexican holders of CPOs and holders of ADSs, are limited in the right to cause the CPO trustee
to vote the shares of Series A common stock underlying the CPOs or underlying the CPOs underlying their ADSs. See “Voting
Rights with Respect to Underlying Shares” below.



Authorization



We filed an application
with the Mexican Foreign Investment Bureau of the Ministry of Economy (Secretaría de Economía)for the authorization
of the terms of the CPO trust for purposes of such CPOs being deemed neutral investment instruments, as contemplated by the Mexican
Foreign investment Law and received such authorization on September 28, 2007. The CPO trustee registered the CPO trust deed with
the Public Registry of Commerce of Mexico City, Federal District. See “Description of Capital Stock — Other Provisions
— Foreign Investment Regulations.”



Voting Rights with Respect to Underlying
Shares



Mexican holders of
CPOs may instruct the CPO trustee to vote the shares of Series A common stock underlying the CPOs on all matters or obtain a proxy
from the CPO trustee to vote the underlying shares. To the extent Mexican holders of CPOs do not obtain a proxy for shares of
Series A common stock underlying their CPOs, fail to vote such stock or fail to instruct the CPO trustee how to vote such shares,
the CPO trustee will vote such shares in the same manner as the majority of other shares are voted at the meeting.



Non-Mexican holders
of CPOs are not entitled to exercise directly any voting rights with respect to our shares of Series A common stock held by the
CPO trustee. Voting rights attributable to shares underlying CPOs held by non-Mexicans are exercisable only by the CPO trustee.
Additionally, non-Mexican holders of CPOs are only entitled to instruct the CPO trustee (or in the case of a holder of ADSs, instruct
the ADS depositary to instruct the CPO trustee) to exercise the voting rights in respect of the shares of Series A common stock
underlying such CPOs in the limited circumstances described below.



105







Non-Mexican holders
of CPOs will be entitled to instruct the CPO trustee (or in the case of a holder of ADSs, instruct the ADS depositary to instruct
the CPO trustee) to exercise the voting rights in respect of the shares of Series A common stock underlying such CPOs only on
the following matters: a change in our jurisdiction of incorporation, a transformation of our corporate form, our dissolution
or liquidation, a merger to which we are a party, if we will not be the surviving company, a delisting of our shares (including
the CPOs) from any stock exchange or an amendment to our bylaws that may adversely affect the rights of the minority shareholders.
In such cases, the CPO trustee will vote the shares of Series A common stock underlying CPOs held (directly or through ADSs) by
non-Mexicans for which it received timely and proper voting instructions as instructed by the applicable non-Mexican holder. Additionally,
for each 10% block of our Series A common stock underlying CPOs held, a non-Mexican holder can instruct the CPO trustee to exercise
a right to appoint one director, provided that the election of a majority of our directors was approved by Mexican investors.
To the extent non-Mexican holders of CPOs fail to instruct the CPO trustee how to vote shares of Series A common stock underlying
their CPOs, the CPO trustee will vote shares for which it did not receive timely and proper instruction in the same manner as
the majority of the other shares are voted at the meeting. Under no circumstances are the non-Mexican holders of CPOs (directly
or through ADSs) entitled to vote the underlying shares of Series A common stock directly or obtain a proxy to vote such shares.



Except in the limited
circumstances described above, the CPO trustee is required by the terms of the trust agreement governing the CPO trust to vote
shares of Series A common stock underlying the CPOs held by non- Mexicans in the same manner as the majority of the other shares
are voted at the meeting.



The nationality of
a CPO holder will be determined under applicable Mexican law and established by reference to the information provided to the CPO
trustee, Indeval and Indeval custodians.



Deposit and Withdrawal of Shares



Holders of CPOs do
not receive physical certificates evidencing their CPOs. However, CPO holders may request certification from their custodian,
coupled with a certification from Indeval as to their ownership of CPOs. In connection with the issuance of ADSs, CPOs underlying
ADSs will be credited by book-entry transfer to an account maintained with Indeval by BBVA Bancomer, S.A. de C.V., as custodian
for the depositary in Mexico.



Except as described
below, holders of CPOs may not withdraw the shares of Series A common stock underlying the CPOs, and holders of ADSs may not withdraw
the shares of Series A common stock underlying the CPOs underlying the ADSs, until the CPO trust is terminated. However, upon
termination of the CPO trust, non- Mexican holders of CPOs must cause the shares of Series A common stock underlying the CPOs
to be sold, create a new trust similar to the current CPO trust to deposit the shares of Series A common stock underlying the
CPOs or extend the CPO trust, as a means to comply with our bylaws and Mexican foreign ownership laws. The holders of CPOs may
withdraw the underlying shares of Series A common stock at any time if our bylaws do not prohibit such withdrawal, we consent
to such withdrawal and the provisions regarding foreign investment ownership and voting, as stipulated by the Mexican Foreign
Investment Law, are not breached by such withdrawal.



Registration and Transfer



CPOs may be held directly
through physical certificates in registered form or held in book-entry form. The CPOs may be maintained in book entry form by
institutions that have accounts with the S.D. Indeval Institución para el Depósito de Valores, S.A. de C.V., or
Indeval, a privately owned securities depositary that acts as a clearinghouse, depositary, and custodian, as well as a settlement,
transfer, and registration agent for Mexican Stock Exchange transactions, eliminating the need for physical transfer of securities.
Indeval will be the holder of record for CPOs held in book-entry form. Accounts may be maintained at Indeval by authorized brokers,
banks and other financial institutions and entities.



Dividends and Other Distributions



If we declare and
pay a dividend or a distribution on our Series A common stock, holders of CPOs will be entitled to receive the dividend or the
distribution in proportion to the number of shares of Series A common stock underlying their CPOs. Holders of CPOs would also
be entitled to a proportional share of the proceeds from the sale of the shares of Series A common stock held by the CPO trustee
upon the termination of the CPO trust agreement, if applicable. According to Mexican law, dividends paid and received in pesos
by the CPO trustee, may be paid to the ADS depositary and converted into U.S. dollars for distribution. Also any dividends or
other distributions from the CPO trust that CPO holders do not receive or claim within three years will become the property of
the Mexican Ministry of Health (Secretaría de Salud).



106







Cash Dividends
and Distributions.The CPO trustee will distribute cash dividends and other cash distributions received in respect of our
Series A common stock to holders of CPOs, including those represented by ADSs, in proportion to their holdings, in the same currency
in which they were received. The CPO trustee will distribute cash dividends and other cash distributions to the relevant custodian
acting for the holder of CPOs.



Stock Dividends.If we distribute our dividends in shares of Series A common stock, dividend shares in respect of shares of Series A common
stock will be held in the CPO trust, and the CPO trustee will distribute additional CPOs to holders of CPOs, including those represented
by ADSs, in proportion to their holdings. If the CPO deed does not permit additional CPOs to be delivered in an amount sufficient
to represent the shares of Series A common stock paid as a dividend, the CPO deed will need to be modified to, or a new CPO deed
will need to be entered into that will, permit the delivery of the number of CPOs necessary to represent the shares of Series
A common stock issued to the CPO trust as a dividend.



Other Distributions.If the CPO trustee receives a distribution in a form other than cash or additional shares of Series A common stock, the CPO
trustee will make the distribution pursuant to the instructions of the technical committee.



Preemptive
Rights



Under Mexican law,
our shareholders generally have preemptive rights. If we offer our shareholders the right to subscribe for additional shares of
Series A common stock, the CPO trustee will only make these rights available to holders of CPOs if the offer is legal and valid
in the CPO holders’ country of residence. In this regard, the offer of corresponding rights to holders of the ADS, and any
sale of additional corresponding CPOs to holders of ADSs, would require registration under the Securities Act or an exemption
therefrom. We are under no obligation to register such offers or sales under the Securities Act or any other applicable law. Under
Mexican law, preemptive rights may not be sold separately from shares. As a result, if the CPO trustee cannot offer preemptive
rights or is effectively prohibited from disposing of preemptive rights, CPO holders would not receive the value of these rights,
and their equity interest may be diluted.



If we issue new shares
of Series A common stock for cash, in accordance with our amended bylaws and the CPO trust, non-Mexican holders of the CPOs and
ADSs may not be able to exercise their preemptive rights associated with shares of Series A common stock underlying such CPOs,
unless a sufficient number of CPOs may be available for release under our CPO deed or unless we cause the CPO trustee to issue
additional CPOs (to the extent possible), by amending the existing CPO deed or entering into a new CPO deed, to permit the non-Mexican
holders of CPOs or ADSs to exercise preemptive rights by purchasing and holding newly issued shares of Series A common stock through
CPOs. Although we expect to take all measures necessary to maintain sufficient CPOs available to permit non-Mexican holders of
CPOs or ADSs to exercise preemptive rights, no assurances can be made that we will be able to do so, particularly because regulatory
approvals in Mexico are necessary for the issuances of CPOs. Mexican holders of CPOs may exercise their preemptive rights if we
issue new shares of Series A common stock for cash regardless of whether additional CPOs are available for release because they
may acquire direct ownership of our Series A common stock, although we would also expect to make CPOs available to such Mexican
holders because the CPOs would be the only listed security. To the extent preemptive rights are extended to holders of the CPOs
and any of such holder exercise such rights, we will transfer the additional shares of Series A common stock in the CPO trust,
and the CPO trustee will deliver additional CPOs to each CPO holder who exercises the preemptive rights.



Withdrawal Rights



In accordance with
applicable Mexican law, only when our shareholders approve a change in our corporate purpose, jurisdiction of organization or
transformation from one corporate form to another, will any CPO holder that did not instruct the CPO trustee to vote the shares
of Series A common stock underlying such holder’s CPOs in favor of these matters have the right to instruct the CPO trustee
to cause the withdrawal of the shares and receive the book value, as set forth in the last financial statements approved by our
shareholders, for them. If the CPO trustee exercises this right on behalf of the CPO holder within 15 days after the meeting at
which the relevant matter was approved, the shares will be withdrawn and the CPO holder will receive the applicable proceeds.



107







Changes Affecting the CPOs



As set forth in the
CPO trust, the CPO trustee will, pursuant to the instructions of the technical committee, issue additional CPOs or call for the
surrender of outstanding CPOs to be exchanged for new CPOs should the following circumstances occur:



| | • | a split or a consolidation of our Series A common stock;
| | - | --------------------------------------------------------



| | • | a capitalization affecting or redemption of our Series A common
    stock;
| | - | --------------------------------------------------------------------------



| | • | any other reclassification or restructuring of our Series A
    common stock; or
| | - | --------------------------------------------------------------------------------



| | • | any merger, consolidation, or spin-off.
| | - | ---------------------------------------



The CPO trustee, as
instructed by the technical committee, will also decide if any changes or required amendments must be made to the CPO trust agreement
and the CPO trust deed. If the CPO deed does not permit additional CPOs to be delivered in an amount sufficient to represent the
shares of Series A common stock necessary to reflect the corporate events specified above, the CPO deed will need to be modified
to, or a new CPO deed will need to be entered into that will, permit the delivery of the number of CPOs necessary to represent
the shares of Series A common stock that reflect any such event. If we consolidate our capital stock in a way that is no longer
consistent with the structure of the CPO trust, the CPO trustee, as instructed by the CPO trust’s technical committee, will
determine how the corpus of the CPO trust should be modified to reflect such consolidation. If we call for a redemption of the
shares of Series A common stock held in the CPO trust, the CPO trustee will follow the instructions of the CPO trust’s technical
committee, and will act pursuant to applicable law, to determine which CPOs will be redeemed, in a number equal to the number
of shares of Series A common stock held in the CPO trust called for redemption. The CPO trustee will then pay the holders of the
redeemed CPOs their proportional share of the consideration.



Administration of the CPO Trust



The CPO trustee will
administer the CPO trust under the direction of a CPO technical committee. Actions taken by the CPO technical committee must be
approved by a majority vote of committee members present at any meeting of the committee at which at least a majority of the members
are present. The CPO technical committee can also act without a meeting, if it has unanimous consent of its members. Among other
matters, the CPO technical committee has the authority to instruct the CPO trustee to increase the maximum number of CPOs that
may be issued, appoint a representative to vote the shares of Series A common stock held by the CPO trustee and resolve questions
not addressed in the CPO trust.



The Common Representative



We appointed Monex
Casa de Bolsa, S.A. de C.V. as the common representative of the holders of CPOs. The duties of the common representative include,
among others:



| | • | verification of the due execution and terms of the CPO trust;
| | - | -------------------------------------------------------------



| | • | verification of the existence
        of the shares Series A common stock being held in the CPO trust;
| | - | ------------------------------------------------------------------------------------------------------
| | • | authentication, by its signature, of the certificates evidencing
    the CPOs;                        



| | • | exercise the rights of CPO holders in connection with the payment
    of any dividend to which they are entitled;
| | - | -----------------------------------------------------------------------------------------------------------------



| | • | undertaking of any other action required to protect the rights,
    actions or remedies to which they are entitled;
| | - | -------------------------------------------------------------------------------------------------------------------



108







| | • | calling and presiding over general meetings of CPO holders;
    and
| | - | -------------------------------------------------------------------



| | • | execution of decisions adopted at general meetings of CPO holders.
| | - | ------------------------------------------------------------------



The common representative
may ask the CPO trustee for all information and data necessary to satisfy its duties. The CPO holders may, by resolution at a
general CPO holders’ meeting, revoke the appointment of the common representative, appoint a substitute common representative
or instruct the common representative to take certain actions regarding the CPO trust.



General Meetings
of CPO Holders



Under Mexican law,
any individual holder or group of holders holding at least 10% of the outstanding CPOs may ask the common representative to call
a general meeting of all CPO holders. The request must include the proposed agenda for the meeting. At least ten days before the
relevant meeting, the common representative must publish announcements of the CPO general meetings in the Official Gazette of
the Federation and in one of the newspapers of its domicile. The announcement must include the meeting’s agenda.



In order for CPO holders
to attend CPO general meetings, they must request a receipt of deposit from Indeval for their certificates and, if applicable,
a certificate from the relevant custodian (coupled with the necessary Indeval certificates) at least two days before the meeting.



At CPO general meetings,
CPO holders will have one vote per CPO held. Resolutions must be approved by a holders of a majority of the CPOs present, whether
in person or by proxy, at the applicable CPO meeting. A quorum is required at these meetings. For a meeting held upon first notice
of the meeting, a quorum is met by holders representing at least a majority of the outstanding CPOs. If no quorum is present on
first call, any CPO holders present at a subsequently called CPO general meeting will constitute a quorum. Duly adopted resolutions
will bind all CPO holders, including absent and dissenting holders.



Some special matters
must be approved by holders at a special CPO general meeting. These matters include the appointment and removal of the common
representative and the granting of consents, waivers or grace periods and the amendment of the CPO deed. At these special meetings,
holders of at least 75% of the outstanding CPOs must be present to constitute a quorum at the first call. Resolutions with respect
to these special matters must be approved by holders of a majority of the CPOs entitled to vote at this meeting. If a quorum is
not present, a reconvened special meeting may be called. At this reconvened meeting, holders of a majority of the CPOs present
(whether in person or by proxy), regardless of the percentage of outstanding CPOs represented at such meeting, may take action,
by majority of holders of CPOs present.



Enforcement of Rights of CPO Holders



CPO holders may individually
and directly exercise certain rights by instituting a proceeding in a Mexican court of law. These rights include:



| | • | the right to cause the CPO trustee to distribute dividends or
    other distributions it has received;
| | - | ------------------------------------------------------------------------------------------------------



| | • | the right to cause the common representative to enforce and
    protect rights of CPO holders; and
| | - | --------------------------------------------------------------------------------------------------



| | • | the right to bring action against the common representative,
    for civil liabilities in the event of willful misconduct.
| | - | --------------------------------------------------------------------------------------------------------------------------



Termination of the CPO Trust



The CPO trust agreement
and the CPOs issued by the CPO trustee thereunder will expire 50 years after the date of execution of the CPO trust agreement,
which is the maximum term permitted by Mexican law. At that time, the CPO trustee, pursuant to the instruction of the CPO trust’s
Technical Committee, will:



| | • | distribute the shares of Series A common stock underlying CPOs
    held by Mexican holders of on a pro rata basis; and
| | - | ----------------------------------------------------------------------------------------------------------------------



109









| | • | with respect to shares of Series A common stock underlying CPOs held by non-Mexicans, the CPO trustee will:
| | - | -----------------------------------------------------------------------------------------------------------



| | o | sell or distribute the applicable shares Series A common stock in the CPO trust, and then distribute the proceeds to CPO holders on a pro rata basis;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



| | o | extend the period for the CPO trust agreement; or
| | - | -------------------------------------------------



| | o | create a new trust similar to the CPO trust to which it will transfer all of the applicable shares of Series A common stock, so that the non-Mexican holders may be the beneficiaries of economic rights in respect of such shares on a pro rata basis.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Fees of the CPO Trustee and the Common
Representative



We will pay the fees
of the CPO trustee for the administration of the CPO trust and the fees of the common representative.



DESCRIPTION OF AMERICAN DEPOSITARY
SHARES



The following information
describes the material terms of the ADS deposit agreement. This description may not contain all of the information that is important
to you. To understand it fully, you should read the deposit agreement and the form of American Depository Receipt, a copy of which
is filed with the SEC as an exhibit to the registration statement filed with the SEC on October17, 2007.



General



The Bank of New York,
as depositary, will register and deliver American Depositary Shares, also referred to as ADSs. Each ADS will represent seven CPOs
(or a right to receive seven CPOs) deposited with the Indeval, and credited to an account maintained by BBVA Bancomer, S.A. de
C.V. as custodian for the depositary in Mexico. Each ADS will also represent any other securities, cash or other property which
may be held by the depositary. The depositary’s corporate trust office at which the ADSs will be administered is located
at 101 Barclay Street, New York, New York 10286. The Bank of New York’s principal executive office is located at One Wall
Street, New York, New York 10286.



ADSs may be held either
(A) directly (i) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate evidencing a specific
number of ADSs, registered in the name of the holder, or (ii) by holding ADSs in the Direct Registration System, or (B) indirectly
through a broker or other financial institution. If you hold ADSs directly, you are an ADS holder. This description assumes you
hold your ADSs directly. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution
to assert the rights of ADS holders described in this section.



The Direct Registration
System, or DRS, is a system administered by the Depository Trust Company, or DTC, pursuant to which the depositary may register
the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements issued by the depositary to the
ADS holders entitled thereto.



We will not treat ADS
holders as one of our shareholders and ADS holders will not have shareholder rights under Mexican law and our bylaws. Mexican law
governs shareholder rights. The depositary will be the holder of the CPOs underlying the ADSs. The holder of ADSs have certain
rights pursuant to a deposit agreement. The deposit agreement among us, the depositary and the ADS holders (including beneficial
owners of ADSs) sets forth certain rights as well as the rights and obligations of the depositary. New York law governs the deposit
agreement and the ADSs.



110







Dividends and Other Distributions



The depositary has
agreed to pay to the cash dividends or other distributions it or the custodian receives in respect of the underlying CPOs or other
deposited securities, after deducting its fees and expenses described below. ADS holders will receive these distributions in proportion
to the number of CPOs their ADSs represent.



Cash Dividends and
Distributions.The depositary will convert any cash dividend or other cash distribution we pay on the shares of Series A common
stock underlying the applicable CPOs into U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars
to the United States. If that is not possible or if any government approval is needed and cannot be obtained, the deposit agreement
allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. It will hold
the foreign currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the foreign
currency and it will not be liable for any interest. Before making a distribution, the depositary will deduct any withholding taxes
or other governmental charges that must be paid. It will distribute only whole U.S. dollars and cents and will round fractional
cents to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency,
ADS holders may lose some or all of the value of the distributions.



Share Dividends
and Distributions.The depositary may distribute additional ADSs representing any additional CPOs issued as a result of our
issuing a share dividend or free distribution. The depositary will only distribute whole ADSs. It will sell CPOs which would require
it to deliver a fractional ADS and distribute the net proceeds in the same way as it does with cash. If the depositary does not
distribute additional ADSs, the outstanding ADSs will also represent the new CPOs. The depositary may sell a portion of the distributed
shares sufficient to pay its fees and expenses in connection with that distribution. The depositary may withhold any such delivery
of ADSs if it has not received reasonable assurance from us that such distribution does not require registration under the Securities
Act of 1933.



Rights to Purchase
Additional CPOs.If the CPO trustee offers CPO holders any rights to subscribe for additional CPOs or any other rights, the
depositary may make these rights available to holders of ADSs. If the depositary decides it is not legal and practical to make
the rights available but that it is practical to sell the rights, the depositary will use reasonable efforts to sell the rights
and distribute the proceeds in the same way as it does with cash. Under current Mexican law, preemptive rights with respect to
our Series A common stock may not be sold apart from the applicable shares of Series A common stock. The depositary will allow
rights that are not distributed or sold to lapse. In that case, ADS holders will receive no value for them. If the depositary makes
rights to purchase CPOs available to ADS holders, it will exercise the rights and purchase the CPOs on their behalf. The depositary
will then deposit the CPOs and deliver ADSs to the applicable ADS holders. It will only exercise rights if ADS holders pay it the
exercise price and any other charges required by the terms of the rights. U.S. securities laws may restrict transfers and cancellation
of the ADSs representing CPOs purchased upon exercise of rights. For example, ADS holders may not be able to trade these ADSs freely
in the United States. In this case, the depositary may deliver restricted depositary shares that have the same terms as the ADSs
described in this section except for changes needed to put the necessary restrictions in place.



Other Distributions.The depositary will send to ADS holders anything else the CPO trustee distributes on deposited securities by any means it determines
to be legal, fair and practical. If the depositary determines that it cannot make the distribution in that manner, the depositary
has a choice. It may decide to sell the distributed assets and distribute the net proceeds, in the same way as it does with cash,
or it may decide to hold the distributed assets, in which case ADSs will also represent the newly distributed assets. However,
the depositary is not required to distribute any securities (other than ADSs) unless it receives satisfactory evidence from us
that it is legal to make that distribution. The depositary may sell a portion of the distributed securities or property sufficient
to pay its fees and expenses in connection with that distribution.



Unlawful or Impracticable
Distributions.The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available
to any ADS holders. We have no obligation to register ADSs, CPOs, shares, rights or other securities under the Securities Act.
We also have no obligation to take any other action to permit the distribution of ADSs, CPOs, shares, rights or anything else to
ADS holders. This means that ADS holders may not receive the distributions we make on our Series A common stock or any value for
such distributions if it is illegal or impractical for us to make them available to such ADS holders.



111







Deposit, Withdrawal and Cancellation



Issuance of ADS
Securities.The depositary will deliver ADSs upon the deposit of CPOs or evidence of rights to receive CPOs with the custodian.
Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary
will register the appropriate number of ADSs in the names requested and will deliver the ADSs at its office to or upon the order
of the person or the persons that made the deposit.



Withdrawal of Deposited
Securities.ADSs may be surrendered at the depositary’s corporate trust office. Upon payment of its fees and expenses
and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the CPOs and any
other deposited securities underlying the surrendered ADSs to the person surrendering the ADSs or a person designated by them at
the office of the custodian or, at the ADS holder’s request, risk and expense, the depositary will deliver the deposited
securities at its corporate trust office, if feasible.



Interchange between
certificated ADSs and uncertificated ADSs.ADRs may be surrendered to the depositary for the purpose of exchanging an ADR for
uncertificated ADSs. The depositary will cancel that ADR and will send a statement confirming the ownership of uncertificated ADSs.
Alternatively, upon receipt by the depositary of a proper instruction from a holder of uncertificated ADSs requesting the exchange
of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to an ADR evidencing those ADSs.



Voting Rights



Unless the CPO trust
agreement is amended to permit non-Mexican owners of CPOs to have unlimited voting rights with respect to the underlying Series
A common stock, non-Mexican owners of ADSs will not have the right to instruct the depositary as to how to vote any Series A common
stock underlying the ADSs with respect to matters that are not expressly provided in the CPO trust. See “Description of CPO
Trust — Voting Rights with Respect to Underlying Shares.” Mexican owners who provide evidence reasonably satisfactory
to us and the CPO trustee of their status as Mexican nationals or Mexican corporations whose bylaws exclude non-Mexican ownership
of their capital stock may instruct the depositary how to vote the Series A common stock underlying their ADS with respect to any
matters.



Subject to the limitation
described above, ADS holders may instruct the depositary to instruct the CPO trustee to vote the shares of Series A common stock
underlying the CPOs that the ADSs represent. The depositary will notify ADS holders of shareholders’ meetings and arrange
to deliver our voting materials to such ADS holders if we ask it to. The materials will describe the matters to be voted on and
explain how ADS holders may instruct the depositary how to vote. For instructions to be valid, the depositary must receive them
on or before the date specified by the depositary. The depositary gives no assurance to ADS holders that they will receive the
notice required sufficiently prior to the date established by the depositary to ensure that the depositary will be able to vote
or give voting instructions with respect to the underlying shares of Series A common stock. The depositary will instruct, as far
as practical, subject to Mexican laws and the CPO trust and our bylaws or similar documents, the CPO trustee to vote the underlying
shares or other deposited securities as instructed. ADS holders will not be able to directly instruct the CPO trustee as to how
to vote the underlying shares unless they withdraw the CPOs. However, ADS holders may not have sufficient notice of a meeting to
allow the timely withdrawal of the applicable CPOs.



Right to Deliver Notices to the Company
and the Common Representative



If an ADS holder gives
a notice to the depositary containing a request for a meeting of holders of CPOs concerning any business of the CPO trust, the
depositary will deliver such notice to the common representative. If an ADS holder gives a notice to the depositary containing
a request for a meeting of holders of the Series A common stock, exercising the right of a shareholder with respect to the underlying
shares or containing a request for the appointment of a director, the depositary will deliver such notice to us. After giving that
notice to the common representative or us, as the case may be, the depositary shall have no further duty or liability with respect
to the notice received from the ADS holder.



112







Fees and Expenses



The depositary collects
its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal
or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees
from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its
annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book
entry system accounts of participants acting for them. The depositary may generally refuse to provide fee attracting services until
its fees for those services are paid.



The Bank of New York,
as depositary, has agreed to reimburse us for expenses we incur that are related to the establishment and maintenance of the ADS
program, including investor relations expenses and stock market application and listing fees. There are limits on the amount of
expenses for which the depositary will reimburse us, but the amount of reimbursement available to us is not related to the amount
of fees the depositary collects from investors.



Payment of Taxes



Holders of ADSs are
responsible for any taxes or other governmental charges payable on their ADSs or on the deposited securities represented by any
ADSs. The depositary may refuse to register any transfer of the ADSs or allow a holder to withdraw the deposited securities represented
by the ADSs until such taxes or other charges have been paid. The depositary may deduct the amount of any taxes owed from any payments
to ADS holders. It may also sell deposited securities represented by the ADSs, to pay any taxes owed. ADS holders will remain liable
for any deficiency if the proceeds of the sale are not enough to pay the taxes owed. If the depositary sells deposited securities,
it will, if appropriate, reduce the number of ADSs to reflect the sale and pay or distribute to the applicable ADS holder any proceeds,
or send to the ADS holder any property, remaining after it has paid the taxes.



Amendment and Termination



We may agree with the
depositary to amend the deposit agreement and the ADRs for any reason without the consent of the ADR holders. If an amendment adds
or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees,
facsimile costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective
for outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes
effective, ADS holders are considered, by continuing to hold ADSs, to agree to the amendment and to be bound by the ADRs and the
deposit agreement as amended.



The depositary will
terminate the deposit agreement at our direction by mailing notice of termination to the ADS holders then outstanding at least
30 days prior to the date fixed in such notice of termination. The depositary may also terminate the deposit agreement if the depositary
has told us and the ADS holders then outstanding that it would like to resign and successor depositary has not been appointed and
accepted its appointment within 60 days. In either case, the depositary must notify ADS holders at least 30 days before termination.



After termination,
the depositary and its agents will do the following under the deposit agreement but nothing else: collect distributions on the
deposited securities, sell rights and other property, and deliver CPOs and other deposited securities upon cancellation of ADSs.
Six months after termination, the depositary may sell any remaining deposited securities by public or private sale. After that,
the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement
for the pro rata benefit of the ADS holders that have not surrendered their ADSs. It will not invest the money and has no liability
for interest. The depositary’s only obligations will be to account for the money and other cash. After termination our only
obligations will be to indemnify the depositary and to pay fees and expenses of the depositary that we agreed to pay.



Limits on our Obligations and the
Obligations of the Depositary, Limits on Liability to Holders of ADSs



The deposit agreement
expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability of the depositary.
We and the depositary:



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| | • | are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith;
| | - | -----------------------------------------------------------------------------------------------------------------------



| | • | are not liable if either of us is prevented or delayed by law or circumstances beyond our control from performing our obligations under the deposit agreement;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | are not liable if either of us exercises discretion permitted under the deposit agreement;
| | - | ------------------------------------------------------------------------------------------



| | • | are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made available to holders of ADSs under the terms of the deposit agreement;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | are not liable for any special, consequential or punitive damages for any breach of the terms of the deposit agreement;
| | - | -----------------------------------------------------------------------------------------------------------------------



| | • | have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on an ADS holders behalf or on behalf of any other person; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | may rely upon any documents we believe in good faith to be genuine and to have been signed or presented by the proper person.
| | - | -----------------------------------------------------------------------------------------------------------------------------



In the deposit agreement,
we agree to indemnify the depositary for acting as depositary, except for losses caused by the depositary’s own negligence
or bad faith, and the depositary agrees to indemnify us for losses resulting from its negligence or bad faith.



Requirements for Depositary Actions



Before the depositary
will deliver or register a transfer of an ADS, make a distribution on an ADS, or permit withdrawal of CPOs, the depositary may
require:



| | • | payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any CPOs or other deposited securities;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and
| | - | ----------------------------------------------------------------------------------------------------------------



| | • | compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



The depositary may
refuse to deliver ADSs or register transfers of ADSs generally when the transfer books of the depositary, the CPO trustee or our
transfer books are closed or at any time if the depositary or we think it advisable to do so.



ADS Holders’ Right to Receive
the CPOs Underlying ADRs



ADS holders have the right to surrender
their ADSs and withdraw the underlying CPOs at any time except:



| | • | when temporary delays arise because: (i) the depositary, the CPO trustee or the Foreign Registrar has closed its transfer books or we have closed our transfer books; (ii) the transfer of CPOs is blocked to permit voting at a shareholders’ meeting; or (iii) we are paying a dividend on our Series A common stock or any other security deposited with the CPO trustee;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | if the ADS holder owes money to pay fees, taxes and similar charges; and
| | - | ------------------------------------------------------------------------



| | • | when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to the ADSs or to the withdrawal of CPOs or other deposited securities.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



114







This right of withdrawal may not be limited
by any other provision of the deposit agreement.



Pre-release of ADSs



The deposit agreement
permits the depositary to deliver ADSs before deposit of the underlying CPOs. This is called a pre-release of the ADSs. The depositary
may also deliver CPOs upon cancellation of pre-released ADSs (even if the ADSs are surrendered before the pre-release transaction
has been closed out). A pre-release is closed out as soon as the underlying CPOs are delivered to the depositary. The depositary
may receive ADSs instead of CPOs to close out a pre-release. The depositary may pre-release ADSs only under the following conditions:
(a) before or at the time of the pre-release, the person to whom the pre-release is being made represents to the depositary in
writing that it or its customer owns the CPOs or ADSs to be deposited; (b) the pre-release is fully collateralized with cash or
other collateral that the depositary considers appropriate; and (c) the depositary must be able to close out the pre-release on
not more than five business days’ notice. In addition, the depositary will limit the number of ADSs that may be outstanding
at any time as a result of pre-release, although the depositary may disregard the limit from time to time, if it thinks it is appropriate
to do so.



Direct Registration System



In the deposit agreement,
all parties to the deposit agreement acknowledge that the DRS and Profile Modification System, or Profile, will apply to uncertificated
ADSs upon acceptance thereof to DRS by the DTC. DRS is the system administered by DTC pursuant to which the depositary may register
the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements issued by the depositary to the
ADS holders entitled thereto. Profile is a required feature of DRS which allows a DTC participant, claiming to act on behalf of
an ADS holder, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to
the DTC account of that DTC participant without receipt by the depositary of prior authorization from the ADS holder to register
such transfer.



In connection with
and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement understand
that the depositary will not verify, determine or otherwise ascertain that the DTC participant which is claiming to be acting on
behalf of an ADS holder in requesting registration of transfer and delivery described in the paragraph above has the actual authority
to act on behalf of the ADS holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement,
the parties agree that the depositary’s reliance on and compliance with instructions received by the depositary through the
DRS/Profile System and in accordance with the deposit agreement, shall not constitute negligence or bad faith on the part of the
depositary.



Shareholder Communications and Inspection
of Register of Holders of ADSs



The depositary will
make available for inspection at its office all communications that it receives from us as a holder of deposited securities that
we make generally available to holders of deposited securities. The depositary will send holders of ADSs copies of those communications
if we ask it to. A holder has the right to inspect the register of holders of ADSs, but not for the purpose of contacting those
holders about a matter unrelated to our business or the ADSs.



115







DIVIDEND POLICY



We have not paid any
cash dividends in the past and do not expect to pay any cash dividends on our common stock for the foreseeable future. We currently
intend to retain any additional future earnings to finance our operations and growth. Any future determination to pay cash dividends
on our common stock will be at the discretion of our board of directors and will depend on our earnings, financial condition, operating
results, capital requirements and contractual, regulatory and other restrictions on the payment of dividends and other factors
our board of directors deems relevant. In addition, we may not pay any dividend unless such dividend is paid from our net profit
account and the financial statements including such net profit and the payment of the relevant dividend have been approved by a
shareholder resolution.



Mexican law requires
that at least 5% of a company’s net income each year (after profit sharing and other deductions required by Mexican law)
be allocated to a legal reserve fund until such fund reaches an amount equal to at least 20% of its capital stock from time to
time (without adjustment for inflation). Our legal reserve fund was Ps.0 million at December 31, 2012.



Mexican companies may
pay dividends only out of earnings (including retained earnings after all losses have been absorbed or paid up), only after such
allocation to the legal reserve fund if the dividend is paid out of retained earnings and only if shareholders have approved the
payment of the dividend. The reserve fund is required to be funded on a stand-alone basis for each company, rather than on a consolidated
basis. The level of earnings available for the payment of dividends is determined under MFRS. Our subsidiaries are required to
allocate earnings to their respective legal reserve funds prior to paying dividends to Maxcom. We are also required to allocate
earnings to our legal reserve fund prior to distributing any dividend payments to our shareholders.



Under provisions of
the Mexican Income Tax Law, dividends paid to Foreign Holders with respect to our CPOs and ADSs are currently not subject to any
Mexican withholding.



Dividends paid from
distributable earnings that have not been subject to corporate income tax are subject to a corporate-level tax (payable by the
Company) at a rate of 30% over the grossed up paid dividend. . Dividends paid from distributable earnings, after the corporate
tax has been paid with respect to these earnings, are not subject to this corporate-level tax at the moment of distribution.



As of December 31,
2012, we had not accumulated distributable earnings that have been subject to the corporate income tax and that could be declared
and paid to shareholders free of the corporate level dividend tax. Accordingly, any dividends we pay in excess of this amount will
be subject to the corporate level dividend tax, and we may apply such corporate level dividend tax as a credit to our tax liability
in the year paid and in the subsequent two years.



In addition, the indenture
that governs the terms of our senior notes due 2014 allows us to pay cash dividends only if we meet the following conditions:



| | • | a minimum consolidated leverage ratio of less than 4.25 to 1.00 on or before December 31, 2007, 4.00 to 1.00 on or after January 1, 2008 and on or before December 31, 2009 and 3.50 to 1.00 on or after January 1, 2010 and on or before December 31, 2011, and 3.6 to 1.00 on or after January 1, 2012.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | no default (as defined in the indenture) must have occurred and be continuing or result from the payment of the cash dividend; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------



| | • | the dividend payments together with the aggregate amount of all other restricted payments (as defined in the indenture) do not exceed a certain amount determined in the indenture based on, among other things: (i) the consolidated net income of the company, (ii) the net cash flows from equity offerings, (iii) the lesser of the return on the restricted investments or the original amount of the restricted investment, (iv) the lesser of the fair market value (as defined in the indenture) of the company’s investment on a subsidiary after its re-designation as a restricted subsidiary or the original fair value as of the date in which such subsidiary was originally designated as unrestricted subsidiary.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



116







In the event we were
to declare dividends, they would be in pesos. In the case of CPOs represented by ADSs, the cash dividends would be paid to the
depositary and, subject to the terms of the deposit agreement, converted into and paid in U.S. dollars, net of withholding taxes
or other governmental charges that must be paid. Fluctuations in exchange rates would affect the amount of dividends that ADS holders
would receive. For a more detailed discussion, see “Description of American Depositary Shares.”



Distributions made
by us other than as dividends, including capital reductions, amortization of shares or otherwise, would be subject to taxation
in Mexico, with taxes being generally payable by us, as corporate-level taxes. The method of assessing and paying taxes applicable
to any such distributions will vary depending on the nature of the distributions.



C. 	Material contracts



Sale of the Telereunión Concession



On March 13, 2006 we
announced the acquisition of Grupo Telereunión, adding a broader national footprint by adding 480 kms of fiber optic rings,
4,300 kms of national backbone with a border crossing into McAllen, and 680 kms of fiber optic infrastructure in the Gulf region.



Given that the license
granted to Telereunión to operate as a long distance carrier and value-added service provider in 1998, duplicates the authorized
services in the concession granted to Maxcom in 1996, Maxcom decided to sell Telereunion’s concession by ceding its rights
and obligations to Qualtel, S.A. de C.V., in exchange of USD$2 million. The operation was authorized by the SCT and was closed
in 2007.



Senior Notes due 2014



On December 20, 2006,
Maxcom completed a private placement of U.S.$150 million aggregate principal amount of senior notes due 2014. On each of January
10, 2007 and September 5, 2007, Maxcom completed a supplemental private placement of U.S.$25 million aggregate principal amount
of senior notes due 2014. The notes accrue interest at 11% per annum payable semi-annually in June and December of each year and
mature on December 15, 2014. The senior notes due 2014 are governed by indenture that Maxcom and its subsidiaries entered into
with The Deutsche Bank Trust Company Americas, acting as trustee. The indenture governing our senior notes due 2014 contains certain
covenants that among other things, limit our ability to incur additional indebtedness and issue preferred stock, pay dividends,
make other restricted payments and investments, create liens, incur restrictions on the ability of our subsidiaries to pay dividends
or other payments to them, sell assets, merge or consolidate with other entities, and enter into transactions with affiliates.
As of December 28, 2007 the senior notes due 2014 were exchanged for substantially identical securities that have been registered
under the U.S. Securities Act of 1933. The terms of the new senior notes due 2014 issued in the exchange offer were substantially
identical to the outstanding senior notes due 2014, except that the transfer restrictions and registration rights relating to the
outstanding senior notes due 2014 do not apply to the new senior notes.



Currency Swap Agreement



The peso-to-dollar
exchange rate may experience significant devaluations in the future. Further declines in the value of the peso relative to the
U.S. dollar could adversely affect our ability to meet our U.S. dollar-denominated obligations, including our senior notes due
2014. In order to diminish the negative effects of a peso devaluation in May 2007, we entered into currency swap transactions with
the banks Morgan Stanley A.G. and Merrill Lynch Capital Markets A.G. to minimize the exchange rate risks related to the coupon
payments with respect to U.S.$150 million aggregate principal amount of the senior notes due 2014, for payments during the period
from June 2008 to December 2010. In December 2009, the company unwound the swap with Morgan Stanley A.G. and entered into a new
swap with the same bank  that covers the exchange rate risk related to the coupon payments with respect to U.S.$75 million
aggregate principal amount of the senior notes due 2014, for payments during the period from June 2010 to December 2014.



In March 2010 the company
unwound the swap with Merrill Lynch Capital Markets A.G. and entered into a new cross currency swap transaction with Morgan Stanley
A.G. that minimize the exchange rate risk related to the coupon payments with respect to U.S.$75 million aggregate principal amount
of the senior notes due 2014, for payments during the period from June 2010 to December 2014.



117







In May 2011 we amended
the cross currency swap agreements with Morgan Stanley (France), SAS to delete from the agreements the clause authorizing Morgan
Stanley to terminate the agreements in case the credit rating of Maxcom continues to decline. In return, Maxcom agreed to deposit
U.S.$1.5 million in a collateral account in Morgan Stanley.



In February 2013 the
company unwound the swap with Morgan Stanley A.G. and as a result, we remain exposed to fluctuations of the peso relative to the
U.S. dollar, which could have a material adverse effect on our ability to meet our payment obligations denominated in U.S. dollars,
thereby adversely affecting our financial condition.



D. Exchange Controls



The peso fluctuates
freely against the U.S. dollar. The Mexican Central Bank intervenes occasionally in the market to stabilize the exchange rate.
Mexico had an exchange control system from 1982 until November 11, 1991. Under this system, Mexican residents and companies were
entitled to purchase, and required to sell, foreign currencies for certain purposes at a controlled rate of exchange that was established
daily by the Central Bank of Mexico. Transactions to which the controlled rate applied included payments for virtually all merchandise
imports, revenues from virtually all merchandise exports, royalty payments and payments of principal, interest and related expenses
with respect to indebtedness to foreign creditors registered with the Mexican government. For all transactions to which the controlled
rate did not apply, foreign currencies could also be purchased, if they were available, at the then prevailing domestic free market
rate for the type of transaction.



Pursuant to the provisions
of North American Free Trade Agreement, or “NAFTA,” Mexico remains free to impose foreign exchange controls on investments
made in Mexico, including those made by U.S. and Canadian investors.



E. Taxation



Certain Material United States Federal
Income Tax Considerations IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the U.S. Internal Revenue
Service, we inform you that any tax advice contained in this document (including any attachments) was not intended or written to
be used, and cannot be used, by any taxpayer for the purpose of avoiding tax-related penalties under the U.S. Internal Revenue
Code. The tax advice contained in this document (including any attachments)was written to support the promotion or marketing of
the transaction(s) or matter(s) addressed by the document. Each taxpayer should seek advice based on the taxpayer’s particular
circumstances from an independent tax advisor. The following is a general discussion of certain material United States federal
income tax considerations to holders of our CPOs and ADSs and our senior notes due 2014. This discussion is a summary for general
information purposes only and does not consider all aspects of U.S. federal income taxation that may be relevant to particular
holders in light of their particular investment circumstances or to certain types of holders that are subject to special tax rules,
including partnerships, grantor trusts, banks, financial institutions or other “financial services” entities, broker-dealers,
insurance companies, tax-exempt organizations, regulated investment companies, real estate investment trusts, retirement plans,
individual retirement accounts or other tax-deferred accounts, dealers or brokers in securities or currencies, persons that use
or are required to use mark-to-market accounting, persons that hold senior notes, CPOs or ADSs as part of a “straddle,”
a “hedge,” a “conversion transaction,” or an “integrated transaction,” persons to whom the
“constructive sale” or “constructive ownership” rules apply, persons with a functional currency other than
the U.S. dollar, investors in partnerships and other pass-through entities, persons that own, or are deemed to own, CPOs or ADSs
constituting 10% or more of our voting power, United States persons who hold senior notes, CPOs or ADSs through banks, financial
institutions or other entities, or branches thereof, located, organized or resident outside the United States, certain former citizens
or permanent residents of the United States and persons subject to the alternative minimum tax. This discussion also does not address
any federal non-income tax considerations or any state, local or foreign income or non-income tax considerations to holders. This
summary assumes that holders own CPOs, ADSs or senior notes exclusively as “capital assets” within the meaning of Section
1221 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) (generally, property held for investment).
This discussion is based on the Code and applicable Treasury Regulations, rulings, administrative pronouncements and decisions
as of the date hereof, all of which are subject to change or differing interpretations at any time with possible retroactive effect.
The authorities on which this discussion is based are subject to various interpretations, and any views expressed in this discussion
are not binding on the U.S. Internal Revenue Service (“IRS”) or the courts. No assurance can be given that the IRS
will agree with the views expressed in this discussion or that a court will not sustain any challenge by the IRS in the event of
litigation.



118







For purposes of this discussion, a “U.S.
Holder” is a beneficial owner of CPOs, ADSs or senior notes that, for U.S. federal income tax purposes, is (i) a citizen
or an individual resident of the United States; (ii) a corporation (or other entity or arrangement treated as a corporation for
U.S. federal income tax purposes)created or organized, or treated as created or organized, in or under the laws of the United States,
any state thereof, or the District of Columbia; (iii) an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or (iv) a trust if a court within the United States is able to exercise primary supervision over its
administration and one or more U.S. persons have authority to control all substantial decisions of the trust or if the trust has
a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.



If a partnership (or entity or arrangement
treated as a partnership for U.S. federal income tax purposes) holds our CPOs, ADSs or senior notes, the tax treatment of a partner
in the partnership will generally depend upon the status of the partner and the activities of the partnership. In this event, the
partner and partnership are urged to consult their tax advisors.



EACH HOLDER IS URGED TO CONSULT ITS
TAX ADVISOR REGARDING THE SPECIFIC FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX CONSIDERATIONS OF HOLDING CPOs, ADSs,
OR SENIOR NOTES.



Senior Notes due 2014The following discussion
assumes that all payments we make on the senior notes are denominated in U.S. dollars. U.S. Tax Characterization of the Senior
Notes. We believe that the senior notes should be treated as debt for U.S. federal income tax purposes, and the following discussion
assumes such treatment.

However, no assurance can be given that
the IRS will not assert that the senior notes should be treated as equity for U.S. federal income tax purposes. If the senior notes
were treated as equity for U.S. federal income tax purposes, the timing, amount and character of income, gain and loss recognized
by you could be different. In addition, under certain circumstances we may be obligated to make payments of amounts in excess of
stated interest or principal on the senior notes that differ from the payments that were expected to be made as of the date that
such senior notes were issued. The fact that we may be obligated to make such payments under certain circumstances may implicate
provisions of the Treasury Regulations that relate to “contingent payment debt instruments.” According to the Treasury
Regulations, the possibility of such payments in excess of stated interest or principal does not cause the senior notes to be considered
contingent payment debt instruments if, as of the date the earlier senior notes that were exchanged for the current senior notes
pursuant to the exchange offer completed on January 7, 2008 were issued, the likelihood that payments on the senior notes would
differ from the payments that were expected to be made was “remote” or if any such difference would be “incidental,”
as those terms are used in the Treasury Regulations. As of January 7, 2008, we believed that the likelihood that we would be obligated
to make any payments that differ from the payments expected to be made as of such date was remote. Therefore, we are not treating,
and do not intend to treat, the senior notes as contingent payment debt instruments. Our determination that these contingencies
are remote is binding on you unless you disclose a contrary position in the manner required by applicable Treasury regulations.
Our determination is not, however, binding on the IRS, and if the IRS were to challenge this determination successfully, the timing,
amount and character of income, gain and loss recognized by you could be different. The remainder of this discussion assumes that
the senior notes will neither be treated as equity nor as contingent payment debt instruments U.S. Holders of Senior Notes.



Payments of Interest



The senior notes were not issued with original
issue discount. Accordingly, subject to the discussion of “Acquisition Premium” below, a U.S. Holder of senior notes
will be taxed on the stated interest on such senior notes at ordinary income rates at the time at which such interest accrues or
is received in accordance with such U.S. Holder’s regular method of accounting for U.S. federal income tax purposes. As discussed
in more detail below, any Mexican tax withheld from a payment to a U.S. Holder under the Mexican withholding tax rules and paid
over to the Mexican government will be treated as if the U.S. Holder received the amount withheld and paid such amount to the Mexican
government itself, and the U.S. Holder will be required to include the amount withheld in such U.S. Holder’s taxable income
in the same manner as payments the U.S. Holder receives on the senior notes. Any income that the U.S. Holder recognizes from a
payment on a senior note will be treated as foreign-source income.



119







Sale or Other Taxable Disposition of
the Senior Notes



If a U.S. Holder sells or otherwise disposes
of senior notes, the U.S. Holder will recognize capital gain or loss equal to the difference between such U.S. Holder’s adjusted
tax basis in the senior notes and the amount of cash plus the fair market value of any property that the U.S. Holder receives in
exchange for the senior notes. This capital gain or loss will constitute long-term capital gain or loss if the U.S. Holder’s
holding period in the senior notes is more than one year at the time of the sale or other taxable disposition and short-term capital
gain or loss if the U.S. Holder’s holding period in the senior notes is not more than one year at the time of the sale or
other taxable disposition. For this purpose, a U.S. Holder’s holding period in a senior note will include the U.S. Holder’s
holding period in a corresponding senior note that the U.S. Holder exchanged for the relevant senior note in the exchange offer
completed on January 7, 2008. Your ability to use any capital loss to offset other income or gain is subject to certain limitations.
Gain or loss you recognize in connection with a sale or other taxable disposition of the senior notes will generally be treated
as U.S.-source gain or loss. A U.S. Holder that sells a senior note between interest payment dates will be required to treat as
ordinary interest income an amount equal to the interest that accrues through the date of sale and has not been previously included
in income.



Acquisition Premium



If you acquired senior notes (or, if applicable,
senior notes that you exchanged for the relevant senior notes in the exchange offer completed on January 7,2008) for an amount
greater than such notes’ stated principal amount, you may elect to amortize the premium using the constant yield method over
the period from your acquisition date until the notes’ stated maturity. The amount amortized in any year will be treated
as a reduction of your interest income from the notes.



The election to amortize the premium on
a constant yield method, once made, applies to all debt obligations held during or after the taxable year in which the election
is made and may not be revoked without the consent of the IRS. If you make this election, you will be required to reduce your basis
in the notes to the extent that any amortizable bond premium is applied to offset your interest income on the notes. If you do
not make this election, the premium on your notes will not offset your interest income on the notes, and instead the premium on
your notes will decrease the gain or increase the loss otherwise recognized on a sale or other taxable disposition of the notes.



Market Discount



If you acquired a senior note for an amount
less than such note’s adjusted issue price, the excess of the note’s stated redemption price at maturity over your
purchase price will be treated as “market discount.” Such market discount, however, will be considered zero if it does
not exceed a “de minimis amount” equal to0.25% of the note’s stated redemption price at maturity multiplied by
the number of complete years to maturity from the date you purchased the senior note.



Under the market discount rules, you will
generally be required to treat any partial principal payment on, and any gain realized on the sale or other taxable disposition
of, the senior note as ordinary income (generally treated as interest income) to the extent of the market discount which accrued
but was not previously included in income during the period you held such senior note. In addition, you may be required to defer
the deduction of all or a portion of the interest expense on any indebtedness incurred or continued to purchase or carry such senior
note until the note’s maturity or your earlier sale or other taxable disposition of the note.



In general, market discount will be considered
to accrue ratably during the period from the date of acquisition to the maturity date of the senior note, unless you make an irrevocable
election (on an instrument-by-instrument basis) to accrue market discount under a constant yield method. A note holder may also
elect to include market discount on the senior note in income currently as it accrues (under either a ratable or constant yield
method), in which case the rules described above regarding the treatment as ordinary income of gain upon the sale or other disposition
of the senior note and the deferral of interest deductions will not apply. The election to include market discount in income currently,
once made, applies to all market discount obligations acquired by the note holder on or after the first day of the first taxable
year to which the election applies, and may not be revoked without the consent of the IRS. Such currently included market discount
will increase the note holder’s tax basis in the senior note and generally is treated as ordinary interest income for U.S.
federal income tax purposes.



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Mexican Withholding Tax



You will be entitled to deduct from your
taxable income any Mexican tax withheld from payments of interest on the senior notes unless you choose to claim the benefits of
the foreign tax credit rules for any foreign tax (including any foreign tax unrelated to the senior notes) in the taxable year
to which the Mexican tax relates. In the latter case, you may not deduct the Mexican tax withheld and you may only claim benefits,
if any, under the foreign tax credit rules with respect to such tax.



The availability of foreign tax credits
is subject to certain conditions and limitations (including minimum holding period requirements), and the rules governing foreign
tax credits are very complex. Subject to such conditions and limitations and a U.S. Holder’s particular tax circumstances,
foreign tax withheld on passive income from foreign sources (including Mexican tax withheld from payments on the senior notes)
can be credited against your U.S. federal income tax liability that is attributable to passive income from foreign sources (including
income from interest payments on the senior notes), but not against your U.S. federal income tax liability that is attributable
to non-passive income from foreign sources or attributable to passive or non-passive income from U.S. sources.



A noteholder may be required to
provide the IRS with a certified copy of the receipt evidencing payment of the Mexican withholding tax imposed in respect of
payments on the senior notes in order to claim a foreign tax credit in respect of such Mexican withholding tax. As discussed
above, the rules governing foreign tax credits are very complex. In addition, the Obama administration recently proposed
several significant changes to the foreign tax credit rules, which if enacted could change the consequences discussed above.
You should consult your tax advisors regarding the rules governing foreign tax credits and the deductibility of foreign
taxes.



New Legislation



Recently enacted legislation requires certain
U.S. Holders who are individuals, estates or trusts to pay a 3.8% tax on net investment income, including on interest and capital
gains, for taxable years beginning after December 31, 2012. In addition, for taxable years beginning after March 18, 2010, new
legislation may require certain U.S. Holders who are individuals to report information relating to the holding of senior notes,
subject to certain exceptions (including an exception for senior notes held in a custodial account maintained with a U.S. financial
institution). U.S. Holders should consult their own tax advisers regarding the effect, if any, of new U.S. federal income tax legislation.



Information Reporting and Backup With holding
A noteholder may be subject to information reporting and/or backup withholding with respect to payments on the senior notes or
the gross proceeds from a sale or other disposition of the senior notes if, in either case, a payment is made to you within the
United States or by a U.S. pay or or U.S. middleman. Backup withholding (currently at a rate of 28%) may apply under certain circumstances
if you (i) fail to furnish your social security or other taxpayer identification number (“TIN”), (ii) furnish an incorrect
TIN, (iii) fail to report interest or dividends properly, or (iv) fail to provide a certified statement, signed under penalty of
perjury, that the TIN provided is correct and that you are not subject to backup withholding. Any amount withheld from a payment
under the backup with holding rules is allowable as a credit against (and may entitle you to a refund with respect to) your federal
income tax liability, provided that the required information is furnished to the IRS. Certain persons are exempt from backup withholding.



Non-U.S. Holders of Senior Notes



A Non-U.S. Holder generally will not be
subject to U.S. federal income or withholding tax on payments on senior notes or gain realized from the sale or other disposition
of senior notes, unless such income or gain is effectively connected with the conduct of a trade or business in the United States
by the Non-U.S.



Holder or, in certain unusual circumstances,
the Non-U.S. Holder is present in the United States for 183 days or more during a taxable year in which the Non-U.S.



121







Holder realizes gain from a sale or other
disposition of senior notes and certain other conditions are met.



A Non-U.S. Holder will generally be exempt
from information reporting requirements and withholding but may be required to comply with certification and identification procedures
in order to obtain these exemptions. If any amount is withheld under the withholding or backup withholding rules of the Code, such
amount is not an additional tax, but rather is credited against the holder’s U.S. federal income tax liability. Holders are
advised to consult their tax advisers to ensure compliance with the procedural requirements to reduce or avoid backup withholding
or, if applicable, to file a claim for a refund of withheld amounts in excess of the holder’s U.S. federal income tax liability.



CPOs or ADSs



For U.S. federal income tax purposes, U.S.
Holders who own ADSs will be treated as the beneficial owners of the CPOs represented by those ADSs. Based on the nature of the
CPO trust and the applicable legal authorities, a U.S. Holder who owns CPOs, or is treated as owning CPOs, should be treated as
the beneficial owner of the Series A common stock represented by the CPOs. However, the U.S. federal income tax treatment of U.S.
Holders that are beneficial owners of CPOs is not entirely clear. The IRS could assert that they should be treated as owning an
interest in an entity or arrangement treated as a foreign trust for U.S. federal income tax purposes. If they were so treated,
the U.S. federal income tax consequences to the U.S. Holder should be the same as outlined below; however, the U.S. Holder would
also be subject to certain additional tax reporting obligations under the foreign trust rules. If these tax reporting obligations
were determined to apply to a U.S. Holder and the U.S. Holder did not comply with them, the U.S. Holder could be subject to substantial
penalties.



The discussion below assumes that the representations
contained in the CPO trust agreement and the ADS deposit agreement are true and that the obligations in the CPO trust agreement,
the ADS deposit agreement and any related agreements will be complied with in accordance with their terms. Otherwise, a holder’s
ability to credit any foreign taxes withheld with respect to CPOs or ADSs against its U.S. federal income tax liability, as well
as a U.S. Holder’s ability to claim the reduced tax rate for dividends (as described below) could be affected.



U.S. Holders of CPOs or ADSs



Taxation of Dividends and Other Distributions.
Subject to the “passive foreign investment company” and “controlled foreign corporation” rules discussed
below, distributions of cash or property with respect to the CPOs or ADSs (including the amount of any Mexican taxes withheld on
any such distribution, if any) will constitute ordinary dividend income to the extent of our current and accumulated earnings and
profits (as determined for U.S. federal income tax purposes), which will be includible in your income on the day on which the dividends
are received by the CPO trustee (whether the U.S. Holder holds the CPOs directly or by way of an ADS) and will be treated as foreign
source dividend income (generally passive income) for foreign tax credit limitation purposes. Any distributions in excess of such
earnings and profits will constitute an on taxable return of capital and reduce a U.S. Holder’s tax basis in the CPOs or
ADSs. To the extent such distributions exceed a U.S. Holder’s tax basis in its CPOs or ADSs, such excess will constitute
capital gain from the sale or other disposition of the CPOs or ADSs and taxed as described below. Dividends on the CPOs or ADSs
will not be eligible for the dividends received deduction allowed to U.S. corporations.



Dividends paid in pesos (including the
amount of any Mexican taxes withheld therefrom, if any) will be includible in a U.S. Holder’s income in a U.S. dollar amount
calculated by reference to the exchange rate in effect on the day the pesos are received by the CPO trustee, regardless of whether
the dividends are converted into U.S. dollars. In addition, any gain or loss resulting from currency exchange fluctuations during
the period from the date the dividend is includible in your income to the date such payment is converted into U.S. dollars will
be foreign currency gain or loss and will be treated as ordinary income or loss. Such gain or loss will generally be treated as
income from sources within the U.S. You should consult your tax advisors regarding the treatment of foreign currency gain or loss,
if any, on any pesos received by the CPO trustee that are converted into U.S. dollars on a date subsequent to such receipt. Dividends
received by individuals or other non-corporate taxpayers from U.S. and certain foreign corporations for years 2003 through 2012
are subject to U.S. federal income tax at the long-term capital gains rate (whereas under current law, such dividends received
for years after 2012 are subject to U.S. federal income tax at ordinary income rates). Recipients of dividends from foreign corporations
will benefit from these reduced rates if the dividends are received from certain “qualified foreign corporations.”
For this purpose, a qualified foreign corporation means any foreign corporation provided that: (i) the corporation was not, in
the year prior to the year in which the dividend was paid, and is not, in the year in which the dividend is paid, a “passive
foreign investment company” (as discussed below), (ii) certain holding period requirements are met and (iii) either (A) the
corporation is eligible for the benefits of a comprehensive income tax treaty with the U.S. that the IRS has approved for purposes
of the qualified dividend rules or (B) the stock with respect to which such dividend was paid is readily tradable on an established
securities market in the U.S. The ADSs should be considered to be readily tradable on an established securities market in the U.S.
so long as they remain listed on the New York Stock Exchange. However, while not completely clear from doubt, we believe that the
CPOs will not be treated as readily tradable on an established securities market in the U.S. Nevertheless, the Secretary of the
Treasury has indicated that the U.S.- Mexico Tax Treaty would qualify under the qualified dividend rules, and we expect the Company
will qualify for the benefits of such treaty. You should consult your tax advisors concerning the availability of the lower rate
for dividends paid with respect to the CPOs and ADSs.



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In addition, the Obama administration has
proposed several significant changes to the foreign tax credit rules and also proposed to extend the period for which certain dividends
are subject to U.S. federal income tax at the long-term capital gains rate, which if enacted could change the consequences discussed
above. You should consult your tax advisors concerning the taxation of dividends and concerning the availability of foreign tax
credits with respect to any Mexican tax imposed with respect to distributions of cash or property with respect to the CPOs or ADSs.



Sale or Other Disposition of the CPOs or
ADSs. Subject to the passive foreign investment company and controlled foreign corporation rules discussed below, upon the sale
or other disposition of the CPOs or ADSs, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference
between the amount realized on the sale or other disposition and such U.S. Holder’s tax basis in such CPOs or ADSs. Gain
or loss recognized by a U.S. Holder on such sale or other disposition will be long-term capital gain or loss if, at the time of
the sale or other disposition, the CPOs or ADSs have been held for more than one year. Your ability to use any capital loss to
offset other income or gain is subject to certain limitations. Deposits and withdrawals of CPOs by U.S. Holders in exchange for
ADSs should not result in the realization of gain or loss for U.S. federal income tax purposes.



A U.S. Holder that receives pesos upon
a sale or other disposition of the CPOs will realize an amount equal to the U.S. dollar value of the pesos upon the date of sale
(or in the case of cash basis and electing accrual basis taxpayers, the settlement date). A U.S. Holder will have a tax basis in
the pesos received equal to the U.S. dollar value of the pesos received translated at the same rate the U.S. Holder used to determine
the amount realized on its disposal of the CPOs. Any gain or loss realized by a U.S. Holder on a subsequent conversion of the pesos
generally will be a U.S. source foreign currency gain or loss and will be treated as ordinary income or loss. U.S. Holders should
consult their own independent tax advisors regarding the treatment of foreign currency gain or loss, if any, on any pesos received
that are converted into U.S. dollars on a date subsequent to receipt.



Passive Foreign Investment Company Considerations



The Company does not
expect to be treated as a “passive foreign investment company” (a “PFIC”), for U.S. federal income tax
purposes. However, as described below, since PFIC status depends upon the composition of the Company’s income and assets
and the market value of its assets (including, among others, goodwill and less than 25% owned equity investments) from time to
time, no assurance can be provided that the Company will not be considered a PFIC for any taxable year. In addition, the Company’s
PFIC status for any particular taxable year is not determinable until the close of that taxable year and is an inherently factual
determination. If the Company were treated as a PFIC for any taxable year during which a U.S. Holder holds CPOs or ADSs, certain
adverse consequences could apply to the U.S. Holder.



A non-U.S. corporation
is considered to be a PFIC for any taxable year if either (i) at least 75% of its gross income is passive income (the “income
test”), or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets during
a taxable year) is attributable to assets that produce or are held for the production of passive income (the “asset test”).
The Company will be treated as owning its proportionate share of the assets and earning its proportionate share of the income of
any other corporation in which its owns, directly or indirectly, more than 25% (by value) of the stock.



123







As discussed above,
whether the Company is a PFIC is determined on a year-by-year basis. As a result, the Company’s PFIC status may change. In
particular, because the total value of the Company’s assets for purposes of the asset test will be calculated using the market
price of the CPOs and ADSs, the Company’s PFIC status will depend in large part on the market price of the CPOs and ADSs,
which may fluctuate considerably. Accordingly, fluctuations in the market price of the CPOs and ADSs may result in the Company
being a PFIC for any year. If the Company is a PFIC for any year during which you hold CPOs or ADSs, the Company generally will
continue to be treated, with respect to you, as a PFIC for all succeeding years during which you hold CPOs or ADSs. However, if
the Company ceases to be a PFIC, you may avoid some of the adverse effects of the PFIC regime by making a deemed sale election
with respect to the CPOs or ADSs, as applicable.



If the Company is a
PFIC for any taxable year during which you hold CPOs or ADSs, you will be subject to special tax rules with respect to any “excess
distribution” that you receive and any gain you realize from a sale or other disposition (including a pledge) of the CPOs
or ADSs unless you make a “mark-to-market” election or a “qualified electing fund” election as discussed
below. Unless you make either of these elections, distributions you receive in a taxable year that are greater than 125% of the
average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the
CPOs or ADSs will be treated as an excess distribution. Under special tax rules, (i) any excess distribution or gain will be allocated
ratably over your holding period for the ADSs or CPOs, (ii) the amount allocated to the current taxable year, and any taxable year
prior to the first taxable year in which the Company became a PFIC, will be treated as ordinary income, and (iii) the amount allocated
to each other year will be subject to the highest tax rate in effect for that year and the interest charge generally applicable
to underpayments of tax will be imposed on the resulting tax attributable to each such year. The tax liability for amounts allocated
to years prior to the year of disposition or excess distribution cannot be offset by any net operating losses for such years, and
gains (but not losses) realized on the sale of the CPOs or ADSs cannot be treated as capital, even if you hold the CPOs or ADSs
as capital assets.



If the Company is a
PFIC, a U.S. Holder may avoid taxation under the rules described above by making a “qualified electing fund” election
to include such U.S. Holder’s share of the Company’s income on a current basis, provided that the Company furnishes
such U.S. Holder annually with certain tax information. In order to avoid taxation under the rules described above, a U.S. Holder
must generally make a “qualified electing fund” election for the first taxable year during which the U.S. Holder owns
stock of the Company and in which the Company is a PFIC. If the Company concludes that it should be treated as a PFIC for any taxable
year, the Company intends to notify each U.S. Holder of such fact. However, there can be no guarantee that the Company will be
willing or able to provide the information needed by any U.S. Holder to make a “qualified electing fund” election with
respect the CPOs or ADSs. If a U.S. Holder makes a “qualified electing fund” election, such U.S. Holder will be taxable
currently on its pro rata share of the Company’s ordinary earnings and net capital gains (at ordinary income and capital
gain rates, respectively) for each taxable year during which the Company is treated as a PFIC, regardless of whether such U.S.
Holder receives distributions, so the U.S. Holder may recognize taxable income without the corresponding receipt of cash from the
Company with which to pay the resulting tax obligation. The basis in the CPOs or ADSs held by such U.S. Holder will be increased
to reflect taxed but undistributed income. Distributions of income that were previously taxed will result in a corresponding reduction
of basis in the CPOs or ADSs, and will not be taxed again as distributions to the U.S. Holder.



Alternatively, a U.S.
Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election with respect to such stock
to elect out of the tax treatment discussed above. In order to elect out of the tax treatment discussed above, a U.S. Holder must
generally make a mark-to-market election for the first taxable year during which the U.S. Holder owns stock of the Company and
in which the Company is a PFIC. If you make a valid mark-to-market election for the CPOs or ADSs, you will include in income each
year an amount equal to the excess, if any, of the fair market value of the CPOs or ADSs as of the close of your taxable year over
your adjusted basis in such CPOs or ADSs. You are allowed a deduction for the excess, if any, of the adjusted basis of the CPOs
or ADSs over their fair market value as of the close of the taxable year. However, deductions are allowable only to the extent
of any net mark-to-market gains on the CPOs or ADSs included in your income for prior taxable years. Amounts included in your income
under a mark-to-market election and gain on the actual sale or other disposition of the CPOs or ADSs are treated as ordinary income.
Ordinary loss treatment applies to the deductible portion of any mark-to-market loss on the CPOs or ADSs, as well as to any loss
realized on the actual sale or disposition of the CPOs or ADSs, to the extent that the amount of such loss does not exceed the
net mark-to-market gains previously included for such CPOs or ADSs. Your basis in the CPOs or ADSs will be adjusted to reflect
any such income or loss amounts. If you make a mark-to-market election, the tax rules that apply to distributions by corporations
that are not PFICs would apply to distributions by us, except that the reduced rate on dividends discussed above would not apply.



124







The mark-to-market
election is available only for “marketable stock,” which is stock that is traded in other than de minimis quantities
on at least 15 days during each calendar quarter (“regularly traded”) on a qualified exchange or other market, as defined
in applicable U.S. Treasury regulations. The New York Stock Exchange and the Mexican Stock Exchange are both qualified exchanges.
The ADSs are listed on the New York Stock Exchange and, consequently, if you are a holder of ADSs and the ADSs remain so listed
and are regularly traded, the mark-to-market election would be available to you were the Company to be a PFIC. In addition, the
CPOs are listed on the Mexican Stock Exchange and, consequently, if you are a holder of CPOs and the CPOs remain so listed and
are regularly traded, the mark-to-market election would be available to you were the Company to be a PFIC.



If you hold CPOs or
ADSs in any year in which we are a PFIC, you will be subject to special reporting requirements with respect to distributions received
on the CPOs or ADSs and any gain realized on the disposition of the CPOs or ADSs.



You are urged to consult
your tax advisors regarding the application of the PFIC rules to your investment in CPOs or ADSs.



Controlled Foreign Corporation Considerations



If more than 50% of
the voting power of all classes of the Company’s capital stock or the total value of the Company’s capital stock is
owned, directly or indirectly, by “U.S. shareholders,” the Company may be treated as a “controlled foreign corporation,”
or a “CFC,” under Subpart F of the Code. For this purpose, the term “U.S. shareholder” has a special meaning
and means citizens or residents of the U.S., U.S. domestic partnerships and corporations or estates or trusts other than foreign
estates or trusts, each of whom owns 10% or more of the total combined voting power of all classes of the Company’s capital
stock. The U.S. taxes a “U.S. shareholder” of a CFC currently on its pro rata share of the Subpart F income of the
CFC. Such “U.S. shareholder” is generally treated as having received a current distribution out of the CFC’s
Subpart F income and is also subject to current U.S. tax on its pro rata share of the CFC’s earnings invested in U.S. property.
In addition, gain from the sale or exchange of stock in a CFC by a U.S. person who is or was a “U.S. shareholder” of
the CFC at any time during the five-year period ending with the sale or exchange is treated as ordinary income to the extent of
the CFC’s earnings and profits attributable to the stock sold or exchanged. If a foreign corporation is both a PFIC and a
CFC, the foreign corporation generally will not be treated as a PFIC with respect to “U.S. shareholders” of the CFC.



You should consult
your own tax advisor as to the potential application of these rules to you based on your particular circumstances.



New Legislation



Recently enacted legislation
requires certain U.S. Holders who are individuals, estates or trusts to pay a 3.8% tax on net investment income, including on dividends
and capital gains, for taxable years beginning after December 31, 2012. In addition, for taxable years beginning after March 18,
2010, new legislation may require certain U.S. Holders who are individuals to report information relating to the holding of CPOs
and ADSs, subject to certain exceptions (including an exception for CPOs and ADSs held in a custodial account maintained with a
U.S. financial institution). U.S. Holders should consult their own tax advisers regarding the effect, if any, of new U.S. federal
income tax legislation.



U.S. Information Reporting and Backup
Withholding.



Dividend payments with
respect to CPOs or ADSs and proceeds from the sale, exchange or redemption of CPOs or ADSs may be subject to information reporting
to the IRS and possible U.S. backup withholding (currently at a rate of 28%). Backup withholding will not apply, however, to a
U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification or who is otherwise
exempt from backup withholding and establishes such exempt status. Backup withholding is not an additional tax. Amounts withheld
as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS and furnishing any
required information.



125







Non-U.S. Holders of CPOs or ADSs



A Non-U.S. Holder will
not be subject to U.S. federal income tax with respect to gain recognized or income realized in connection with the CPOs or ADSs
unless (i) in the case of a disposition of the CPOs or ADSs by an individual Non-U.S. Holder, the Non-U.S. Holder is present in
the U.S. for 183 days or more in the taxable year, and certain other conditions are met, or (ii) the gain or income resulting from
the CPOs or ADSs is effectively connected with a trade or business of the Non-U.S. Holder in the U.S. (and, if a tax treaty applies,
is attributable to a U.S. permanent establishment of the Non-U.S. Holder). Non-U.S. Holders should consult their own tax advisors
concerning any possible U.S. tax consequences associated with the purchase, ownership, and disposition of the CPOs or ADSs.



U.S. Information Reporting and Backup
Withholding.



Dividend payments with
respect to CPOs or ADSs may be subject to information reporting to the IRS and possible U.S. backup withholding (currently at a
rate of 28%) if such dividend payments are treated as made within the U.S. Proceeds from the sale, exchange or redemption of CPOs
or ADSs may also be subject to information reporting to the IRS and possible U.S. backup withholding (currently at a rate of 28%)
if a Non-U.S. Holder holds or sells the CPOs or ADSs through a U.S., or U.S.-related, broker or financial institution, or through
the U.S. office of a non-U.S. broker or financial institution. Backup withholding will not apply, however, to a non-U.S. Holder
that establishes an exemption from information reporting and backup withholding by certifying such holder’s foreign status
on an appropriate IRS Form W-8.



The IRS may make information
reported to you and the IRS available under the provisions of an applicable income tax treaty to the tax authorities in the country
in which you reside. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your
U.S. federal income tax liability, if any, provided the required information is timely furnished by you to the IRS. You should
consult your own tax advisors regarding the filing of a U.S. tax return for claiming a refund of any such backup withholding.



THE U.S. FEDERAL INCOME TAX DISCUSSION
SET FORTH ABOVE IS INCLUDED FOR GENERALINFORMATION PURPOSES ONLY. HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORSTO DETERMINE
THE FEDERAL, STATE AND LOCAL AND NON-U.S. TAX CONSIDERATIONS OFOWNING OUR SENIOR NOTES, OR CPOs, OR ADSs.



Mexican Income
Tax Considerations



The following is a
summary of the principal consequences under Mexico’s Income Tax Law (Ley del Impuesto sobre la Renta), which we refer
to in this section as Law, regulations thereto and rules thereunder and under the Tax Treaties (as defined below), of the purchase,
ownership and disposition of the senior notes due 2014, CPOs and ADSs by a holder that is not a resident of Mexico for tax purposes
and that will not hold the senior notes, CPOs, ADSs or a beneficial interest therein in connection with the conduct of a trade
or business through a permanent establishment in Mexico (each, a “Foreign Holder”).



It does not purport
to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase, hold or dispose
of the senior notes, CPOs or ADSs by a Foreign Holder. In addition, it does not describe any tax consequences (i) arising under
the laws of any taxing jurisdiction other than Mexico, (ii) arising under the laws of any state or municipality within Mexico,
or (iii) arising to a holder of the senior notes, CPOs or ADSs that is a resident of Mexico for tax purposes or to a non-resident
of Mexico that is holding the senior notes, CPOs or ADSs through a permanent establishment in Mexico for tax purposes, to which
the relevant income is attributable.



This summary is based
on the aforementioned laws in effect on January 1, 2012, which are subject to change. Each Foreign Holder should consult its own
tax advisor as to the particular Mexican or other tax consequences to such Foreign Holder of purchasing, holding or disposing of
the senior notes, CPOs or ADSs, including the applicability and effect of any state, municipal, local or foreign tax laws.



126







Mexican Tax Residence



For purposes of Mexican
taxation, an individual is a resident of Mexico if he has established his home in Mexico. If the individual also has a home in
another country, the individual will be deemed a resident of Mexico for tax purposes when his “center of vital interests”
is located in Mexico. For these purposes, the center of vital interests will be deemed to be located in Mexico if, among other
considerations, (i) more than 50% of the individual’s total income, obtained in a calendar year, qualifies as Mexican source
income, or (ii) when the individual’s main center of professional activities is located in Mexico. Mexican nationals who
file a change of tax residence to a country or jurisdiction that does not have a comprehensive exchange of information agreement
with Mexico, in which his or her income is subject to a preferred tax regime pursuant to the provisions of the Mexican Income Tax
Law, will be considered Mexican residents for tax purposes during the year of filing of the notice of such residence change and
during the following three years. Mexican nationals are deemed Mexican residents for tax purposes unless such nationals can demonstrate
otherwise.



A legal entity is a
resident of Mexico for tax purposes if it has established the principal management of its business or the place of effective management
in Mexico.



United States
of America/Mexico and Other Tax Treaties



Provisions of the Convention
for the Avoidance of Double Taxation and Prevention of Fiscal Evasion between the United States of America and Mexico effective
as of January 1, 1994, together with a related Protocol thereto, and a second Protocol effective July 22, 2003, which we refer
to collectively as the Tax Treaty, that may affect the taxation of certain Foreign Holders that are United States of America holders
of the senior notes, CPOs or ADSs, are summarized below. The United States of America and Mexico have also entered into an agreement
that covers the exchange of information with respect to tax matters. Mexico has also entered into treaties for the avoidance of
double taxation with around 54 countries, including Germany, Australia, Canada, France, Italy, United Kingdom, Japan, The Netherlands,
Switzerland and Singapore, and treaties for the exchange of information with around 50 countries, including Canada, Italy, The
Netherlands and Japan, among others.



Mexican Tax Consequences
to Foreign Holders of the Senior Notes



Taxation of Interest and Principal



Under the Mexican Income
Tax Law, payments of interest made by us with respect of the senior notes (including payments of principal in excess of the issue
price of such senior notes, which, under Mexican law, are deemed to be interest) to a Foreign Holder will generally be subject
to a Mexican withholding tax assessed at a rate of 4.9% (the “Reduced Rate”), provided that:



| | • | the senior notes are placed through banks or brokerage houses in a country with which Mexico has
entered into a tax treaty for the avoidance of double taxation that is in force;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | we have delivered notice of the offering of the senior notes to the CNBV pursuant to Article 7
of the Mexican Securities Market Law (Ley del Mercado de Valores); and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | certain periodic information requirements by the Mexican Ministry of Finance (Secretaría
de Hacienda y Crédito Público) are complied with.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



If these requirements are not
satisfied, the applicable withholding tax rate will be 10%.



To date, we have complied
with the requirements set forth above and we expect to continue filing the periodic information to the Mexican Ministry of Finance
(Secretaría de Hacienda y Crédito Público) and therefore, we expect to continue to withhold Mexican
tax from interest payments on the senior notes at the Reduced Rate.



127







However, a withholding
at the tax rate of 30% will be applicable if the effective beneficiaries of interest payments, whether directly or indirectly,
individually or jointly with related parties, of more than 5% of the aggregate amount of such payments under the senior notes are:



| | • | our shareholders who own, directly or indirectly, individually or jointly with related parties,
more than 10% of our voting stock; or
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| | • | legal entities 20% or more of whose stock is owned, directly or indirectly, individually or jointly
with related parties, by us or by persons related to us.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------



Payment of interest
(including payments of amounts deemed interest) we make with respect of the senior notes to a non-Mexican pension or retirement
fund that is a Foreign Holder, will be generally exempt from Mexican withholding taxes, provided that (i) the fund is the effective
beneficiary of such interest income, (ii) the fund is duly established pursuant to the laws of its country of residence, (iii)
the relevant interest income is exempt from taxation in such country, and (iv) the fund is duly registered with the Mexican Ministry
of Finance (Secretaría de Hacienda y Crédito Público) in accordance with rules issued for these purposes.



We have agreed, subject
to specified exceptions and limitations, to pay additional amounts to Foreign Holders of the senior notes in respect of the Mexican
withholding taxes applicable to interest payments and amounts deemed interest under the senior notes.



Holders or beneficial
owners of the senior notes may be requested to provide certain information or documentation necessary to enable us to establish
the appropriate Mexican withholding tax rate applicable to such holders or beneficial owners. In the event that the specified information
or documentation concerning the holder or beneficial owner is requested and is not provided on a timely basis, our obligation to
pay additional amounts may be limited.



During fiscal year
2012, the Tax Treaty and the other tax treaties had no material effect on the Mexican tax consequences described in this section,
this derived that as described above if certain requirements are met, under Mexican law interest payments (including payments of
amounts deemed interest) to a Foreign Holder will generally be subject to a Mexican withholding tax at the Reduced Rate. During
2013, such treaties are not expected to have any material effect on the Mexican tax consequences described.



Under the Mexican Income
Tax Law, payments of principal made by us in respect of the senior notes to a Foreign Holder will not be subject to a Mexican withholding
tax.



Sale or disposition of the senior notes



Under the Mexican Income
Tax Law regulations, gains resulting from the sale or other disposition of the senior notes by a Foreign Holder to another Foreign
Holder are not taxable in Mexico. Gains resulting from the sale of the senior notes by a Foreign Holder to a Mexican resident for
tax purposes or to a foreign holder deemed to have a permanent establishment in Mexico for tax purposes will be subject to Mexican
taxes pursuant to the rules described above in respect of interest payments.

Other Taxes



A Foreign Holder will
not be liable for Mexican estate, gift, inheritance or similar taxes with respect to the purchase, holding or disposition of the
senior notes, nor will it be liable for Mexican flat rate business tax (IETU) stamp, issue, registration or similar taxes.



Mexican Tax Consequences
to Foreign Holders of the CPOs and ADSs



Taxation of Dividends and Other Distributions



Under provisions of
the Mexican Income Tax Law, dividends paid to Foreign Holders with respect to our CPOs and ADSs are currently not subject to any
Mexican withholding.



128







Dividends paid from
distributable earnings that have not been subject to corporate income tax are subject to a corporate-level tax (payable by the
Company) at a rate of 30% over the grossed up paid dividend. Dividends paid from distributable earnings, after the corporate tax
has been paid with respect to these earnings, are not subject to this corporate-level tax at the moment of distribution.



Distributions made
by us other than as dividends, including capital reductions, amortization of shares or otherwise, would be subject to taxation
in Mexico, with taxes being generally payable by us, as corporate-level taxes. The method of assessing and paying taxes applicable
to any such distributions will vary depending on the nature of the distributions.



Sale or Disposition of CPOs or ADSs



The sale or other disposition
of CPOs or ADSs by a Foreign Holder will not be subject to any Mexican tax if the transaction is carried out through the Mexican
Stock Exchange or other stock exchange or securities markets that meet certain characteristics. Sales or other dispositions of
our CPOs or ADSs made in other circumstances generally would be subject to Mexican tax at a rate of 25% based on the aggregate
amount of the transaction, without any deductions, or, subject to certain requirements applicable to the seller, at a rate of 30%
imposed on gains realized from the disposition.



A U.S. Holder that
is eligible to claim the benefits of the Tax Treaty will be exempt from Mexican tax on gains realized on a sale or other disposition
of CPOs or ADSs in a transaction that is not carried out through the Mexican Stock Exchange or such other exchange or securities
markets, provided that such gains are not attributable to a permanent establishment for tax purposes in Mexico, and further provided
that the holder did not own, directly or indirectly, 25% or more of our share capital (including ADSs) during the twelve-month
period preceding the sale or other disposition. Tax treaties celebrated with other countries provide similar benefits.



Under the Mexican Income
Tax Law currently in force, any person or group of persons that, directly or indirectly, hold 10% or more of our outstanding CPOs
or ADSs, shall be obligated to pay Mexican income taxes in respect of a sale of our CPOs or ADSs, even if the sale is carried out
through the Mexican Stock Exchange or any other exchange or securities markets, if the sale comprises a block equal to or exceeding
10% of our outstanding CPOs or ADSs, in a single transaction or a series of transactions, during any 24 month period.



Also, in case a person
or group of persons who have our control, alienate CPOs or ADSs that represents such control (as it is defined by the Mexican Securities
Market Law), in one or successive transactions, during a period of 24 months, shall be obligated to pay Mexican income taxes derived
from such transactions, even if the sale is carried out through the Mexican Stock Exchange or any other exchange or securities
markets.



Other Taxes



A Foreign Holder will
not be liable for Mexican estate, Mexican flat rate business tax (IETU),gift, inheritance or similar taxes with respect
to the purchase, holding or disposition of the CPOs or ADSs, nor will it be liable for Mexican stamp, issue, registration or similar
taxes.



F. Dividends and paying agents



Not applicable.



G. Statement by experts



Not applicable.



H. Documents on display



For further information
pertaining to us and our CPOs and ADSs, please consult the filings we have made with the SEC. Statements contained in this annual
report concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has
been filed as an exhibit to any filing we have made with the SEC, we refer you to the copy of the contract or document that has
been filed. Each statement in this annual report relating to a contract or document filed as an exhibit to any filing we have made
with the SEC is qualified in its entirety by the filed exhibit.



129







We file reports, including
annual reports on Form 20-F, and other information electronically with the SEC pursuant to the rules and regulations of the SEC
that apply to foreign private issuers. You may read and copy any materials filed with the SEC at its Public Reference Room at 100
F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. Any filings we make are also available to the public over the Internet at the SEC’s website at www.sec.gov
and at our website at http://www.maxcom.com/ir. (This URL is intended to be an inactive textual reference only. It is not intended
to be an active hyperlink to our website. The information on our website, which might be accessible through a hyperlink resulting
from this URL, is not and shall not be deemed to be incorporated into this Annual Report.)



I. Subsidiary information



Not applicable.



ITEM 11. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



We are exposed to market risk
from changes in interest rates and currency exchange rates.



Quantitative and Qualitative Disclosures
About Market Risk



The peso-to-dollar exchange rate may experience
significant devaluations in the future. Further declines in the value of the peso relative to the U.S. dollar could adversely affect
our ability to meet our U.S. dollar-denominated obligations, including our senior notes due 2014. In order to diminish the negative
effects of a peso devaluation in May 2007, we entered into currency swap transactions with the banks Morgan Stanley A.G. and Merrill
Lynch Capital Markets A.G. to minimize the exchange rate risks related to the coupon payments with respect to U.S.$150 million
aggregate principal amount of the senior notes due 2014, for payments during the period from June 2008 to December 2010. In December
2009, the company unwound the swap with Morgan Stanley A.G. and entered into a new swap with the same bank  that covers the
exchange rate risk related to the coupon payments with respect to U.S.$75 million aggregate principal amount of the senior notes
due 2014, for payments during the period from June 2010 to December 2014. The other swap with Merrill Lynch Capital Markets A.G.
remained as initially contracted.



In March 2010 the company unwound the swap
with Merrill Lynch Capital Markets A.G. and entered into a new cross currency swap transaction with Morgan Stanley A.G. that minimize
the exchange rate risk related to the coupon payments with respect to U.S.$75 million aggregate principal amount of the senior
notes due 2014, for payments during the period from June 2010 to December 2014.



At December 31, 2012 an immediate 10% devaluation
of the peso relative to the U.S. dollar would have increased our interest expense (related to the interest payments on the U.S.$50
million aggregate principal amount of our notes not covered by the currency swaps; we have coverage over the interest payments
of U.S.$150 million) by approximately Ps.7.2 million over a one−year period. In addition, any further decrease in the value
of the peso may negatively affect the value of the notes.



Interest Rate Risk



At December 31, 2012,
the senior notes due 2014 constituted substantially all of our indebtedness. We did not have variable interest debt outstanding.



Foreign Exchange Risk



Our primary foreign
currency exposure relates to our U.S. dollar-denominated debt. A substantial portion of this debt is incurred to finance U.S. dollar-denominated
capital expenditures. The majority of our debt obligations at December 31, 2012 were denominated in U.S. dollars. Therefore, we
are exposed to currency exchange rate risks that could significantly affect our ability to meet our obligations. In addition, during
May 2007 we entered into a 3-year coupon swap which fixed the peso exchange rate for the U.S.$150 million dollar denominated interest
coupons to be paid during the period from June 2008 to December 2010 with respect to our senior notes due 2014.



130







The exchange rate of
the peso to the U.S. dollar is a freely-floating rate and the peso has experienced significant devaluations in recent years. Any
significant decrease in the value of the peso relative to the U.S. dollar in the near term may have a material adverse effect on
our results of operations and financial condition, including our ability to repay or repurchase the notes. At December 31, 2012,
an immediate 10% devaluation of the peso relative to the U.S. dollar would have increased our interest expense (related to the
interest payments on the U.S.$50 million aggregate principal amount of our senior notes due 2014 not covered by the currency swap)
by approximately Ps.7.2 million over a one-year period.



To the extent capital
expenditures are financed with operating cash flows, we are also exposed to foreign currency fluctuations. Substantially all of
our capital expenditures are denominated in U.S. dollars. In addition, our operating lease for our headquarters building is denominated
in U.S. dollars.



ITEM 12. DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES



A. Debt Securities



Not applicable.



B. Warrants and Rights



Not applicable.



C. Other Securities



Not applicable.

D. American Depositary Shares



3. Fees and Expenses



The depositary collects
its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal
or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees
from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its
annual fee for depositary services by deductions from cash distributions or by directly billing investors or by charging the book-entry
system accounts of participants acting for them. The depositary may generally refuse to provide fee-attracting services until its
fees for those services are paid.



The following table
sets forth the applicable fees for various services, transactions and activities related to the ADSs.



|Persons Depositing or Withdrawing CPOs or ADRHolders Must Pay: |  | For:                                                                                                                                                                                                                                                      
|-------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                               |  |                                                                                                                                                                                                                                                           
|U.S.$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)      |  | ·   Issuance
        of ADSs, including issuances resulting from a distribution of shares, CPOs or rights or other property
        
        ·   Cancellation
        of ADSs for the purpose of withdrawal, including if the deposit agreement terminates



131







|U.S.$.02 (or less) per ADS                                                                                                                                                               |  | ·Any
cash distribution to you                                                                                                                                                
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                         |  |                                                                                                                                                                              
|A fee equivalent to the fee that would be payable if securities distributed to you had been CPOs and the CPOs had been deposited for issuance of ADSs                                    |  | ·Distribution
of securities distributed to holders of deposited securities which are distributed by the depositary to ADS holders                                            
|                                                                                                                                                                                         |  |                                                                                                                                                                              
|U.S.$.02 (or less) per ADS per calendar year                                                                                                                                             |  | ·Depositary
services                                                                                                                                                         
|                                                                                                                                                                                         |  |                                                                                                                                                                              
|Registration or transfer fees                                                                                                                                                            |  | ·Transfer
and registration of CPOs on our CPO register to or from the name of the depositary or its agent when you deposit or withdraw CPOs                                  
|                                                                                                                                                                                         |  |                                                                                                                                                                              
|Expenses of the depositary                                                                                                                                                               |  | ·  Cable,
        telex and facsimile transmission (when expressly provided in the deposit agreement)
        
        ·  Converting
        foreign currency to U.S. dollars
|                                                                                                                                                                                         |  |                                                                                                                                                                              
|Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or CPO underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes |  | ·As
necessary                                                                                                                                                                



4.      The
Bank of New York, as depositary, has agreed to reimburse us for expenses we incur that are related to the establishment and maintenance
of the ADS program, including investor relations expenses and stock market application and listing fees. There are limits on the
amount of expenses for which the depositary will reimburse us, but the amount of reimbursement available to us is not related to
the amount of fees the depositary collects from investors.



PART
II



ITEM 13. DEFAULTS,
DIVIDEND ARREARAGES AND DELINQUENCIES



Maxcom is not in default
under any of its obligations nor is any payment of dividends in arrears.



ITEM 14. MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS



Reclassification of Capital Stock and
2007 Initial Public Offering



On October 24, 2007,
we completed an initial public offering of shares of our Series A common stock in the form of Ordinary Participation Certificates
(Certificados de Participación Ordinariosor CPOs for its initials in Spanish), including American Depositary Shares,
or ADSs, comprised of CPOs. In connection with the initial public offering, each issued and outstanding share of our Series A,
Series B and Series N common stock was converted into one new share of Series A common stock. As of September 30, 2007, we had
issued and outstanding 17,289,620 shares of Series A common stock, 16,611,595 shares of Series B common stock and 450,455,821 shares
of Series N common stock. Upon completion of the reclassification, which took place prior to the closing of our initial public
offering, we had 484,357,036 shares of Series A common stock issued and outstanding.



132







We issued a total of
355,517,292 shares of Series A common stock, including the primary and secondary portions and the overallotment option, in the
initial public offering. During the initial public offering 853,592 options were exercised. Immediately following the closing of
our initial public offering, our outstanding capital stock consisted of 789,818,829 shares of Series A common stock, 1,528,827
shares of which represent the fixed portion of our capital stock and 788,290,002 shares of which represent the variable portion
of our capital stock. We received U.S.$244.0 million in net proceeds from the initial public offering. The principal purpose of
the initial public offering was to raise capital resources which we intended to use for capital expenditures to further expand
our network. The funds obtained from the initial public offering were sufficient to fund working capital, planned capital spending
and debt service requirements for the eighteen months following the initial public offering.



ITEM 15. CONTROLS
AND PROCEDURES



(a) Disclosure Controls
and Procedures



Under the supervision
and with the participation of our management, including our principal executive officer and principal financial officer, we conducted
an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, 2010.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered
by this report our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provide
reasonable assurance that the information required to be disclosed in our reports filed under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and forms and information is accumulated and
communicated to management including our principal executive officer and principal financial officer, as appropriate to allow timely
decisions regarding required disclosures.



(b) Management’s Annual
Report on Internal Control over Financial Reporting



Management is responsible
for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f)
and 15d-15(f) of the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision
of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, provide reasonable assurance
regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of a company’s assets, (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of the financial statements in accordance with generally accepted accounting principles, and that a company’s
receipts and expenditures are being made only in accordance with authorizations of a company’s management and directors,
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of a company’s assets that could have a material effect on the consolidated financial statements.



Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.



Management has conducted
an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2012 based
on the criteria described in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations
of the Tread way Commission (COSO). Based on this assessment and those criteria, management has concluded that the Company’s
internal control over financial reporting as of December 31, 2012 was effective.



(c) Attestation Report of
the Independent Registered Public Accounting Firm



Not Applicable.



133







ITEM 16A. AUDIT COMMITTEE
FINANCIAL EXPERT



Our board of directors
has determined that Mr. Juan Miguel Gandoulf Castellanos is an audit committee financial expert as defined under the Securities
and Exchange Commission guidelines. Mr. Gandoulf is an independent director of the board. Mr. Gandoulf is also “independent”
in accordance with the NYSE listing standards and applicable SEC rules.



ITEM 16B. CODE OF
ETHICS



Since March 2006, we
adopted a code of ethics in compliance of the requirements of the Securities and Exchange Commission that applies to our principal
executive officer, principal financial officer, principal accounting officer and other corporate and divisional employees. For
further information see Exhibit 11.1.



We will provide a complimentary
copy of Maxcom’s code of ethics upon request. Written requests for such copies should be directed to Maxcom Telecomunicaciones,
S.A.B. de C.V., Guillermo González Camarena No. 2000, Colonia Centro de Ciudad Santa Fe, Mexico, D.F. 01210, attention:
Manager, Investor Relations. Telephone requests may be directed to 011-52-55-4770-1170.



If we grant any amendment
or waiver of such provisions, we will disclose such waiver on our website, www.maxcom.com, within five business days of any such
amendment or waiver.



ITEM 16C. PRINCIPAL
ACCOUNTANT FEES AND SERVICES



The following table
sets forth the aggregate fees for professional services rendered by KPMG Cárdenas Dosal, S.C. for each of the fiscal years
ended December 31, 2012 and 2011:



|                       |  | Year Ended December 31 |     
|---------------------- |  | ---------------------- | ----
|                       |  | 2012                   |     
|                       |  | (In millions)          |     
|Audit Fees(1)          |  | Ps.                    | 5.4 
|Audit Related Fees (2) |  | Ps.                    | 6.2 
|All Other Fees (3)     |  | Ps.                    | 0.0 
|Total                  |  | Ps.                    | 11.6





| | (1) | Audit Fees include fees associated with the annual audit of our consolidated financial statements. Audit fees also include fees associated with Securities and Exchange Commission statutory, annual reporting audit requirements and internal control over financial reporting.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Audit Related Fees are fees that support the auditing and reporting process, but are not directly related to it.
| | --- | ----------------------------------------------------------------------------------------------------------------



| | (3) | Other Fees includes fees for advisory and training services.
| | --- | ------------------------------------------------------------



We have introduced
procedures for the review and pre-approval of any services performed by KPMG Cárdenas Dosal, S.C. The procedures require
that all proposed engagements of KPMG Cárdenas Dosal, S.C. for audit and permitted non-audit services are submitted to our
Audit Committee for approval prior to the beginning of any such services.



ITEM 16D. EXEMPTIONS
FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES



Not Applicable.



134







ITEM 16E. PURCHASE
OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS



On March 24, 2008,
by means of resolutions adopted by the General Extraordinary and Ordinary Shareholders Meetings, the shareholders approved the
share repurchase regulations, also the shareholders’ approved the repurchase of shares in an amount not to exceed Ps.36.2
million (U.S.$2.7 million) for 2008. The share repurchase program approved on March 24, 2008 is the only share repurchase program
in effect.



During the fiscal year
ended December 31, 2012 we didn’t purchase any CPOs in the BMV, through the Company ́s stock repurchase program. The
detail of the purchases is as follows:



|          |  |                                        |  | Total number of |           |  | Average price paid |     |         | Total number of CPOspurchased for the repurchase |  |  | Approximate value ofCPOs that may yet bepurchased under the | 
|--------- |  | -------------------------------------- |  | --------------- | --------- |  | ------------------ | --- | ------- | ------------------------------------------------ |  |  | ----------------------------------------------------------- | 
|Period    |  | Dates                                  |  | CPOs purchased  |           |  | per CPO (1)        |     |         | program                                          |  |  | repurchase program (2)                                      | 
|2008:     |  |                                        |  |                 |           |  |                    |     |         |                                                  |  |  |                                                             | 
|January   |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|February  |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|March     |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|April     |  | From April 15 to April 29, 2008        |  |                 | 1,841,900 |  |                    | Ps. | 17.7094 |                                                  |  |  | 1,841,900                                                   | 
|May       |  | From May 5 to May 30, 2008             |  |                 | 2,198,800 |  |                    | Ps. | 18.3854 |                                                  |  |  | 2,198,800                                                   | 
|June      |  | From June 3 to June 30, 2008           |  |                 | 702,800   |  |                    | Ps. | 19.4713 |                                                  |  |  | 702,800                                                     | 
|July      |  | From July 2 to July 31, 2008           |  |                 | 387,100   |  |                    | Ps. | 16.8034 |                                                  |  |  | 387,100                                                     | 
|August    |  | From August 1 to August 28, 2008       |  |                 | 580,800   |  |                    | Ps. | 12.9328 |                                                  |  |  | 580,800                                                     | 
|September |  | From September 9 to September 29, 2008 |  |                 | 272,800   |  |                    | Ps. | 12.4724 |                                                  |  |  | 272,800                                                     | 
|October   |  | From October 1 to October 27, 2008     |  |                 | 388,800   |  |                    | Ps. | 9.8259  |                                                  |  |  | 388,800                                                     | 
|November  |  | From November 4 to November 21, 2008   |  |                 | 89,900    |  |                    | Ps. | 7.0312  |                                                  |  |  | 89,900                                                      | 
|December  |  | From December 1 to December 31, 2008   |  |                 | 147,100   |  |                    | Ps. | 7.8380  |                                                  |  |  | 147,100                                                     | 
|2009:     |  |                                        |  |                 |           |  |                    |     |         |                                                  |  |  |                                                             | 
|January   |  | From January 7 to January 29, 2009     |  |                 | 196,200   |  |                    | Ps. | 7.0726  |                                                  |  |  | 196,200                                                     | 
|February  |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|March     |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|April     |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|May       |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|June      |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|July      |  | From July 30 to July 31, 2009          |  |                 | 160,100   |  |                    | Ps. | 5.1756  |                                                  |  |  | 160,100                                                     | 
|August    |  | From August 4 to August 26, 2009       |  |                 | 547,100   |  |                    | Ps. | 5.7586  |                                                  |  |  | 547,100                                                     | 
|September |  | From September 9 to September 30, 2009 |  |                 | 352,300   |  |                    | Ps. | 6.9345  |                                                  |  |  | 352,300                                                     | 
|October   |  | From October 1 to October 26, 2009     |  |                 | 309,300   |  |                    | Ps. | 6.9268  |                                                  |  |  | 309,300                                                     | 
|November  |  | From November 3 to November 11, 2009   |  |                 | 30,000    |  |                    | Ps. | 6.3680  |                                                  |  |  | 30,000                                                      | 
|December  |  | From December 1 to December 31, 2009   |  |                 | 250,500   |  |                    | Ps. | 9.5015  |                                                  |  |  | 250,500                                                     | 
|2010:     |  |                                        |  |                 |           |  |                    |     |         |                                                  |  |  |                                                             | 
|January   |  | From January 11 to January 14, 2010    |  |                 | 96,200    |  |                    | Ps. | 11.0100 |                                                  |  |  | 96,200                                                      | 
|February  |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|March     |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|April     |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|May       |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|June      |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|July      |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|August    |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|September |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|October   |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|November  |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|December  |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|2011:     |  |                                        |  |                 |           |  |                    |     |         |                                                  |  |  |                                                             | 
|January   |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|February  |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|March     |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|April     |  | From April 5 to April 11, 2011         |  |                 | 413,300   |  |                    | Ps. | 5.9044  |                                                  |  |  | 413,300                                                     | 
|May       |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|June      |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|July      |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|August    |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|September |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|October   |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|November  |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|December  |  | From December 5 to December 5, 2011    |  |                 | 25,000    |  |                    | Ps. | 3.3500  |                                                  |  |  | 25,000                                                      | 
|2012:     |  |                                        |  |                 |           |  |                    |     |         |                                                  |  |  |                                                             | 
|January   |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|February  |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|March     |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|April     |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|May       |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|June      |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|July      |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|August    |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|September |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|October   |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|November  |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 
|December  |  | —                                      |  |                 | —         |  |                    |     | —       |                                                  |  |  | —                                                           | 



| | (1) | Average price paid is presented in nominal pesos.
| | --- | -------------------------------------------------



| | (2) | Approximate value of CPOs that may yet be purchased under the repurchase program is presented in millions of nominal pesos.
| | --- | ---------------------------------------------------------------------------------------------------------------------------



135







Since December 6, 2011 the Company has
not made any further purchase of CPOs or ADSs. Historically the repurchase program has only traded CPOs. The repurchase program
does not have a set date for expiration, but it is limited to the Ps.36.2 million (U.S.$2.7 million) approved by the shareholders.



ITEM 16F. CHANGE
IN REGISTRANT’S CERTIFYING ACCOUNTANT



Not Applicable.



ITEM 16G. CORPORATE
GOVERNANCE



Pursuant to Section
303A.11 of the Listed Company Manual of the New York Stock Exchange, or the NYSE, we are required to provide a summary of the significant
ways in which our corporate governance practices differ from those required for U.S. companies under the NYSE listing standards.



The table below discloses
the significant differences between our corporate governance practices and the NYSE standards.



136







|NYSE Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | Our Corporate Governance Practices                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Director Independence.Majority of board of directors must be independent. §303A.01                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | Director Independence.Pursuant to the Mexican Securities Market Law and our bylaws, our shareholders are required to appoint a Board of Directors of no more than 21 members, 25% of whom must be independent. Certain persons are per se non-independent, including insiders, control persons, major suppliers and any relatives of such persons. In accordance with the Mexican Securities Market Law, our shareholders’ meeting is required to make a determination as to the independence of our directors, though such determination may be challenged by the CNBV. There is no exemption from the independence requirement for controlled companies.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Executive Sessions.Non-management directors must meet regularly in executive sessions without management. Independent directors should meet alone in an executive session at least once a year. §303A.03                                                                                                                                                                                                                                                                                                                   |  | Executive Sessions.Our non-management directors have not held executive sessions without management in the past, and under our bylaws and applicable Mexican law, they are not required to do so.                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Nominating/Corporate Governance Committee.Nominating/corporate governance committee of independent directors is required. The committee must have a charter specifying the purpose, duties and evaluation procedures of the committee. §303A.04                                                                                                                                                                                                                                                                            |  | Nominating Committee.We currently do not have, and are not required to have, a nominating committee. However, Mexican law requires us to have one or more committees that oversee the corporate governance function. We have an audit and corporate practices committee which performs corporate governance functions.                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Compensation Committee.Compensation committee of independent directors is required, which must evaluate and approve executive officer compensation. The committee must have a charter specifying the purpose, duties and evaluation procedures of the committee. §303A.05                                                                                                                                                                                                                                                  |  | Compensation Committee.We are not required to have a compensation committee. We have an audit and corporate practices committee, which assists our board of directors in evaluating and compensating our senior executives. All of the members of the audit and corporate practices committee are independent.                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Audit Committee.Audit committee satisfying the independence and other requirements of Exchange Act Rule 10A-3 and the more stringent requirements under the NYSE standards is required. §§303A.06, 303A.07                                                                                                                                                                                                                                                                                                                 |  | Audit Committee.We have an audit and corporate practices committee of three members. Each member of this committee is independent, as independence is defined under the Mexican Securities Market Law, and also meets the independence requirements of Exchange Act Rule 10A-3. Our audit committee operates primarily pursuant to (1) a written charter adopted by our board of directors and (2) Mexican law. For a detailed description of the duties of our audit and corporate practices committee, see “Management — Committees — Audit and Corporate Practices Committee.”                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Equity Compensation Plans.Equity compensation plans require shareholder approval, subject to limited exemptions. §§303A.08 & 312.03                                                                                                                                                                                                                                                                                                                                                                                        |  | Equity Compensation Plans. Shareholder approval is required for the adoption and amendment of an equity-compensation plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Shareholder Approval for Issuance of Securities.Issuances of securities (1) that will result in a change of control of the issuer, (2) that are to a related party or someone closely related to a related party, (3) that have voting power equal to at least 20% of the outstanding common stock voting power before such issuance or (4) that will increase the number of shares of common stock by at least 20% of the number of outstanding shares before such issuance require shareholder approval. §§312.03(b)-(d) |  | Shareholder Approval for Issuance of Securities.Mexican law and our bylaws require us to obtain shareholder approval of the issuance of equity securities. Treasury stock, however, may be issued by the board of directors without shareholder approval.                                                                                                                                                                                                                                                                                                                                                                                                 



137







|Corporate Governance Guidelines. Listed companies are required to adopt and maintain corporate governance guidelines, addressing, among other things, director qualification standards, director responsibilities, director access to management and independent advisors, management succession and annual performance evaluations of the board. §303A.09 |  | Corporate Governance GuidelinesWe operate under corporate governance principles that we believe are consistent with the principles of Rule 303A.09, and which are described in the Company’s website under “Corporate Governance”.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Code of Business Conduct and Ethics. A code of business conduct and ethics is required, with disclosure of any waiver for directors or executive officers. The code must contain compliance standards and procedures that will facilitate the effective operation of the code. §303A.10                                                                    |  | Code of Business Conduct and Ethics. We have adopted a code of ethics, which has been accepted by all of our directors and executive officers and other personnel. We also will post all waivers therefrom by any of our directors or executive officers on our website. We will provide a complimentary copy of our code of ethics upon request.                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Conflicts of Interest.Determination of how to review and oversee related party transactions is left to the listed company. The audit committee or comparable body, however, could be considered the forum for such review and oversight. §307.00. Certain issuances of common stock to a related party require shareholder approval. §312.03(b)            |  | Conflicts of Interest.In accordance with Mexican law and our bylaws, the audit and corporate practices committee must provide an opinion regarding any transaction with a related party that is outside of the ordinary course of business, which transactions must also be approved by the board of directors. Pursuant to the Mexican Securities Market Law, our Board of Directors will establish certain guidelines regarding related party transactions that do not require Board approval.                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Solicitation of Proxies. Solicitation of proxies and provision of proxy materials is required for all meetings of shareholders. Copies of such proxy solicitations are to be provided to NYSE. §§402.00 & 402.04                                                                                                                                           |  | Solicitation of Proxies.We are required under Mexican law to solicit proxies and provide proxy materials for meetings of shareholders. In accordance with Mexican law and our bylaws, we are also required to inform shareholders of all meetings by public notice, which states the requirements for admission to the meeting, provides a mechanism by which shareholders can vote by proxy and makes proxies available. Under the deposit agreement relating to the ADSs, holders of the ADSs receive notices of shareholders’ meetings and, where applicable, instructions on how to vote at the shareholders’ meeting either in person or through a person having a proxy specifically designated by the shareholder.



138







PART
III



ITEM 17. FINANCIAL
STATEMENTS



We have responded to
item 18 in lieu of responding to this Item.



ITEM 18. FINANCIAL
STATEMENTS



|                                                                                                           |  | Page
|---------------------------------------------------------------------------------------------------------- |  | ----
|Maxcom Telecomunicaciones, S.A.B. de C.V. and Subsidiaries                                                 |  | F-1 
|Report of Independent Registered Public Accounting Firm                                                    |  | F-2 
|Consolidated Statements of Financial Position as of December 31, 2012, 2011 and January 1 2011             |  | F-3 
|Consolidated Statements of Comprehensive Loss for the years ended December 31, 2012 and 2011               |  | F-4 
|Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2012 and 2011. |  | F-5 
|Consolidated Statements of Cash Flows for the years ended December 31, 2012 and 2011.                      |  | F-6 
|Notes to the Consolidated Financial Statements for the years ended December 31, 2012 and 2011.             |  | F-7 



139







MAXCOM TELECOMUNICACIONES, S. A. B. DE
C. V.

AND SUBSIDIARIES



Consolidated Financial Statements



December 31 2012 and 2011 and January 1,
2011 and for the years ended December 31, 2012 and 2011.



F-1











Report of Independent Registered Public
Accounting Firm



The Board of Directors and Stockholders

Maxcom Telecomunicaciones, S. A. B. de
C. V.:



We have audited the accompanying consolidated
statements of financial position of Maxcom Telecomunicaciones, S. A. B. de C. V. and subsidiaries (the ‘Company’) as
of December 31, 2012 and 2011 and January 1, 2011, and the related consolidated statements of comprehensive loss, changes in equity
and cash flows for the years ended December 31, 2012 and 2011. These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on
our audits.



We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of Maxcom Telecomunicaciones, S.
A. B. de C. V. and subsidiaries as of December 31, 2012 and 2011 and January 1, 2011, and the results of their operations and their
cash flows for the years ended December 31, 2012 and 2011, in conformity with International Financial Reporting Standards as issued
by the International Accounting Standards Board.



The accompanying consolidated financial
statements have been prepared assuming that the Company will continue operating as a going concern. As discussed in notes 3 and
21 to the consolidated financial statements, the Company has experienced recurring losses, declines in revenues, cash flows and
cash balances. Additionally, the Company’s ability to fulfill its debt obligations that mature in 2014, including the payment
of semi-annual interest payments on such obligations is dependent on obtaining sufficient cash for the outstanding interest payments
and on successfully completing the refinancing of the debt obligations. This raises substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans in regard to these matters are described in note 3 to the consolidated
financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of
this uncertainty.



KPMG Cardenas Dosal, S. C.



/s/ Luis A. Carrero Roman



Luis A. Carrero Roman

Mexico City, Mexico

May 15, 2013



F-2







MAXCOM TELECOMUNICACIONES,
S. A. B. DE C. V. AND SUBSIDIARIES



Consolidated Statements of Financial Position

December 31, 2012 and 2011 and January 1,
2011



(In thousands of Mexican pesos)



|                                                         |  | December 31, |            |   | December 31, |   |            | January 1, | 
|-------------------------------------------------------- |  | ------------ | ---------- | - | ------------ | - | ---------- | ---------- | 
|                                                         |  | 2012         |            |   | 2011         |   |            | 2011       | 
|Assets                                                   |  |              |            |   |              |   |            |            | 
|Current assets:                                          |  |              |            |   |              |   |            |            | 
|Cash and cash equivalents (note 8)                       |  | $            | 146,516    |   |              | $ | 396,580    |            | 
|Derivative financial instruments  (note 16)              |  |              | 16,385     |   |              |   | 27,583     |            | 
|Accounts receivables— net (note 9)                       |  |              | 614,674    |   |              |   | 654,740    |            | 
|Value added tax recoverable                              |  |              | 49,668     |   |              |   | 88,554     |            | 
|Other sundry debtors                                     |  |              | 72,775     |   |              |   | 46,236     |            | 
|Inventory — net                                          |  |              | 17,512     |   |              |   | 8,895      |            | 
|Prepaid expenses                                         |  |              | 16,047     |   |              |   | 25,109     |            | 
|Total current assets                                     |  |              | 933,577    |   |              |   | 1,247,697  |            | 
|                                                         |  |              |            |   |              |   |            |            | 
|Non-current assets:                                      |  |              |            |   |              |   |            |            | 
|Telephone network systems and equipment — net (note 11)  |  |              | 3,892,246  |   |              |   | 3,956,307  |            | 
|Intangible assets — net (note 12)                        |  |              | 136,326    |   |              |   | 127,419    |            | 
|Deferred income taxes — net (note 10)                    |  |              | 9,793      |   |              |   | 12,888     |            | 
|Prepaid expenses                                         |  |              | -          |   |              |   | -          |            | 
|Guaranty deposits                                        |  |              | 7,769      |   |              |   | 7,709      |            | 
|Derivative financial instruments (note 16)               |  |              | 15,756     |   |              |   | 54,058     |            | 
|Other assets                                             |  |              | 2,151      |   |              |   | 2,151      |            | 
|Total long lived assets                                  |  |              | 4,064,041  |   |              |   | 4,160,532  |            | 
|                                                         |  |              |            |   |              |   |            |            | 
|Total assets                                             |  | $            | 4,997,618  |   |              | $ | 5,408,229  |            | 
|                                                         |  |              |            |   |              |   |            |            | 
|Liabilities and Stockholders’ Equity                     |  |              |            |   |              |   |            |            | 
|Current liabilities:                                     |  |              |            |   |              |   |            |            | 
|Accounts payable                                         |  | $            | 406,532    |   |              | $ | 215,773    |            | 
|Accruals                                                 |  |              | 27,752     |   |              |   | 19,701     |            | 
|Current installments of obligations under capital leases |  |              | 5,488      |   |              |   | 2,975      |            | 
|Customer deposits                                        |  |              | 2,152      |   |              |   | 2,051      |            | 
|Other taxes payable                                      |  |              | 25,999     |   |              |   | 34,626     |            | 
|Accrued interests (note 14)                              |  |              | 11,920     |   |              |   | 14,372     |            | 
|Total current liabilities                                |  |              | 479,843    |   |              |   | 289,498    |            | 
|                                                         |  |              |            |   |              |   |            |            | 
|Non-current liabilities:                                 |  |              |            |   |              |   |            |            | 
|Derivative financial instruments (note 16)               |  |              | -          |   |              |   | -          |            | 
|Senior notes (note 14)                                   |  |              | 2,282,774  |   |              |   | 2,744,287  |            | 
|Installments of obligations under capital leases         |  |              | 5,173      |   |              |   | 6,141      |            | 
|Other accounts payable                                   |  |              | 30,970     |   |              |   | 39,650     |            | 
|Labor obligations upon retirement (note 17)              |  |              | 4,198      |   |              |   | 2,485      |            | 
|Other long term liabilities                              |  |              | 29,333     |   |              |   | 28,345     |            | 
|Deferred income taxes — net (note 10)                    |  |              | -          |   |              |   | -          |            | 
|Total long-term liabilities                              |  |              | 2,352,448  |   |              |   | 2,820,908  |            | 
|                                                         |  |              |            |   |              |   |            |            | 
|Total liabilities                                        |  |              | 2,832,291  |   |              |   | 3,110,406  |            | 
|                                                         |  |              |            |   |              |   |            |            | 
|Stockholders’ equity (notes 18 and 19):                  |  |              |            |   |              |   |            |            | 
|Capital stock                                            |  |              | 4,814,428  |   |              |   | 4,814,428  |            | 
|Additional paid-in capital                               |  |              | 3,592      |   |              |   | 817,054    |            | 
|Accumulated losses                                       |  |              | (2,652,693 | ) |              |   | (3,333,659 | )          | 
|Repurchase of shares                                     |  |              | -          |   |              |   | -          |            | 
|Total stockholders’ equity                               |  |              | 2,165,327  |   |              |   | 2,297,823  |            | 
|                                                         |  |              |            |   |              |   |            |            | 
|Total liabilities and stockholders’ equity               |  | $            | 4,997,618  |   |              | $ | 5,408,229  |            | 



The accompanying notes are an integral
part of these consolidated financial statements.



F-3







MAXCOM TELECOMUNICACIONES, S. A. B.
DE C. V. AND SUBSIDIARIES



Consolidated Statements of Comprehensive
Loss

for the years ended December 31, 2012 and
2011



(In thousands of Mexican pesos, except share
data)



|                                                       |  | 2012 |           |   | 2011 |  
|------------------------------------------------------ |  | ---- | --------- | - | ---- | -
|                                                       |  |      |           |   |      |  
|Net revenues  (note 7)                                 |  | $    | 2,201,252 |   |      | $
|                                                       |  |      |           |   |      |  
|Operating costs and expenses:                          |  |      |           |   |      |  
|Network operating costs                                |  |      | 812,086   |   |      |  
|Selling, general and administrative expenses           |  |      | 699,611   |   |      |  
|Depreciation and amortization                          |  |      | 576,565   |   |      |  
|Other expenses                                         |  |      | 171,279   |   |      |  
|Restructuring charges (note 3)                         |  |      | 5,899     |   |      |  
|Total operating costs and expenses                     |  |      | 2,265,440 |   |      |  
|                                                       |  |      |           |   |      |  
|Operating (loss) income                                |  |      | (64,188   | ) |      |  
|                                                       |  |      |           |   |      |  
|Interest expense                                       |  |      | (300,941  | ) |      |  
|Interest income                                        |  |      | 5,779     |   |      |  
|Foreign currency gain (loss)                           |  |      | 190,477   |   |      |  
|Gain on repurchase of senior notes (note 14)           |  |      | 97,845    |   |      |  
|Derivative financial instruments (loss) gain (note 16) |  |      | (49,500   | ) |      |  
|                                                       |  |      |           |   |      |  
|Net finance cost                                       |  |      | (56,340   | ) |      |  
|                                                       |  |      |           |   |      |  
|Loss before income taxes                               |  |      | (120,528  | ) |      |  
|                                                       |  |      |           |   |      |  
|Income taxes expense (benefit) (note 10):              |  |      | 15,560    |   |      |  
|                                                       |  |      |           |   |      |  
|Net loss and comprehensive loss for the year           |  | $    | (136,088  | ) |      | $
|                                                       |  |      |           |   |      |  
|Loss and comprehensive loss per share:                 |  |      |           |   |      |  
|Basic loss per common share (pesos)                    |  |      | (0.17     | ) |      |  
|Diluted loss per common share (pesos)                  |  |      | (0.17     | ) |      |  
|                                                       |  |      |           |   |      |  
|Weighted average basic shares (thousands)              |  |      | 789,819   |   |      |  
|Weighted average diluted shares (thousands)            |  |      | 789,819   |   |      |  



The accompanying notes are an integral part of these consolidated
financial statements.



F-4







MAXCOM TELECOMUNICACIONES, S. A. B.
DE C. V. AND SUBSIDIARIES



Consolidated Statements of Changes in Stockholders’
Equity

for the years ended December 31, 2012 and
2011



(In thousands of Mexican pesos)



|                                                          |  | Capital stock |           |  | Additional paid-in capital |   |          | Accumulated losses |  |   | Repurchase of
                                                                                                                                                                                      shares |   |  | Total stockholders’ equity |       
|--------------------------------------------------------- |  | ------------- | --------- |  | -------------------------- | - | -------- | ------------------ |  | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - |  | -------------------------- | ------
|                                                          |  |               |           |  |                            |   |          |                    |  |   |                                                                                                                                                                                                            |   |  |                            |       
|Balances as of January 1, 2011                            |  | $             | 4,814,428 |  |                            | $ | 813,135  |                    |  | $ | (2,820,522                                                                                                                                                                                                 | ) |  | $                          | (1,062
|Stock option plan (note 19)                               |  |               | -         |  |                            |   | 3,919    |                    |  |   | -                                                                                                                                                                                                          |   |  |                            | -     
|Repurchase of shares                                      |  |               | -         |  |                            |   | -        |                    |  |   | -                                                                                                                                                                                                          |   |  |                            | 1,062 
|Comprehensive net loss                                    |  |               | -         |  |                            |   | -        |                    |  |   | (513,137                                                                                                                                                                                                   | ) |  |                            | -     
|                                                          |  |               |           |  |                            |   |          |                    |  |   |                                                                                                                                                                                                            |   |  |                            |       
|Balances as of December 31, 2011                          |  | $             | 4,814,428 |  |                            | $ | 817,054  |                    |  | $ | (3,333,659                                                                                                                                                                                                 | ) |  | $                          | -     
|                                                          |  |               |           |  |                            |   |          |                    |  |   |                                                                                                                                                                                                            |   |  |                            |       
|Balances as of January 1, 2012                            |  | $             | 4,814,428 |  |                            | $ | 817,054  |                    |  | $ | (3,333,659                                                                                                                                                                                                 | ) |  |                            | -     
|Reclassification of additional  paid-in capital (note 18) |  |               | -         |  |                            |   | (817,054 | )                  |  |   | 817,054                                                                                                                                                                                                    |   |  |                            | -     
|Stock option plan (note 19)                               |  |               | -         |  |                            |   | 3,592    |                    |  |   | -                                                                                                                                                                                                          |   |  |                            | -     
|Comprehensive net loss                                    |  |               | -         |  |                            |   | -        |                    |  |   | (136,088                                                                                                                                                                                                   | ) |  |                            | -     
|                                                          |  |               |           |  |                            |   |          |                    |  |   |                                                                                                                                                                                                            |   |  |                            |       
|Balances as of December 31, 2012                          |  | $             | 4,814,428 |  |                            | $ | 3,592    |                    |  | $ | (2,652,693                                                                                                                                                                                                 | ) |  | $                          | -     



The accompanying notes are an integral part of these consolidated
financial statements.



F-5







MAXCOM TELECOMUNICACIONES,
S. A. B. DE C. V. AND SUBSIDIARIES



Consolidated Statements of Cash Flows

for the years ended December 31, 2012 and
2011



(In thousands of Mexican pesos)



|                                                              |  | 2012 |          |   | 2011 |  
|------------------------------------------------------------- |  | ---- | -------- | - | ---- | -
|Cash flow from operating activities:                          |  |      |          |   |      |  
|Loss before taxes                                             |  | $    | (120,528 | ) |      | $
|Adjustments for:                                              |  |      |          |   |      |  
|Depreciation and amortization                                 |  |      | 576,565  |   |      |  
|Loss on sale of telephone network systems and equipment       |  |      | 59,625   |   |      |  
|Foreign exchange (gain) loss not realized                     |  |      | (207,596 | ) |      |  
|Gain on repurchase of senior notes                            |  |      | (97,845  | ) |      |  
|Interest expense                                              |  |      | 300,941  |   |      |  
|Derivative financial instruments                              |  |      | 49,500   |   |      |  
|Cost of stock option plan                                     |  |      | 3,592    |   |      |  
|Other non-cash items                                          |  |      | (100,048 | ) |      |  
|                                                              |  |      |          |   |      |  
|Subtotal                                                      |  |      | 464,206  |   |      |  
|                                                              |  |      |          |   |      |  
|Changes in:                                                   |  |      |          |   |      |  
|Accounts receivable                                           |  |      | 121,485  |   |      |  
|Value added tax recoverable                                   |  |      | 38,886   |   |      |  
|Other sundry debtors                                          |  |      | (26,539  | ) |      |  
|Inventory                                                     |  |      | (8,488   | ) |      |  
|Prepaid expenses                                              |  |      | 9,062    |   |      |  
|Accounts payable                                              |  |      | 190,759  |   |      |  
|Customer deposits                                             |  |      | 101      |   |      |  
|Other taxes payable                                           |  |      | (8,627   | ) |      |  
|Income taxes paid                                             |  |      | (2,452   | ) |      |  
|Other accounts payable                                        |  |      | (8,680   | ) |      |  
|Labor obligations upon retirement                             |  |      | 1,713    |   |      |  
|Other liabilities and taxes payable                           |  |      | 988      |   |      |  
|                                                              |  |      |          |   |      |  
|Net cash generated from operating activities                  |  |      | 772,414  |   |      |  
|                                                              |  |      |          |   |      |  
|Cash flows from investing activities:                         |  |      |          |   |      |  
|Capital expenditures                                          |  |      | (583,390 | ) |      |  
|Proceeds from sale of telephone network systems and equipment |  |      | 2,354    |   |      |  
|Decrease in other non-current assets                          |  |      | (60      | ) |      |  
|                                                              |  |      |          |   |      |  
|Net cash used in investing activities                         |  |      | (581,096 | ) |      |  
|                                                              |  |      |          |   |      |  
|Cash flows from financing activities                          |  |      |          |   |      |  
|Interest paid                                                 |  |      | (260,625 | ) |      |  
|Repurchase of senior notes                                    |  |      | (182,302 | ) |      |  
|Capital lease, payment of credits                             |  |      | 1,545    |   |      |  
|Repurchase of shares                                          |  |      | -        |   |      |  
|                                                              |  |      |          |   |      |  
|Net cash used in financing activities                         |  |      | (441,382 | ) |      |  
|                                                              |  |      |          |   |      |  
|Net (decrease) increase in cash and equivalents               |  |      | (250,064 | ) |      |  
|                                                              |  |      |          |   |      |  
|Cash and cash equivalents:                                    |  |      |          |   |      |  
|At beginning of year                                          |  |      | 396,580  |   |      |  
|                                                              |  |      |          |   |      |  
|At end of year                                                |  | $    | 146,516  |   |      | $



The accompanying notes are an integral part of these consolidated
financial statements.



F-6







MAXCOM TELECOMUNICACIONES, S. A. B.
DE C. V. AND SUBSIDIARIES



Notes to the Consolidated Financial Statements

as of December 31, 2012 and 2011 and January
1, 2011,

and for the years ended December 31, 2012
and 2011



(In thousands of Mexican pesos)



NOTE 1 — ENTITY, INCORPORATION
AND CHANGE OF INCORPORATION STRUCTURE:



Maxcom Telecomunicaciones, S. A. B. de
C. V. (“Maxcom” or the “Company”), is a Mexican Limited Liability Public stock Corporation with variable
capital incorporated on February 28, 1996. Its main corporate purpose is the construction and operation of a telephone network,
voice over IP, local, national and international long-distance telephone services, public telephone, data transfer services, internet,
pay TV, virtual private network services and other value-added services, within Mexico. The Company also provides mobile telephone
services as a virtual mobile network operator. The Company began its commercial operations in May 1999.



Pursuant to the resolutions adopted by
the shareholders at the General Extraordinary and Ordinary Shareholders Meetings held on September 13, 2007, and by virtue of the
public offering of shares carried out by the Company in Mexico and abroad, Maxcom was denominated as a publicly listed stock company
with variable capital (“sociedad anónima bursátil de capital variable” or “S.A.B. de C.V.”).
Now, the Company is subject not only to the applicable provisions of the Business Corporations Law but to the stock exchange regulations
under the Stock Exchange Laws in Mexico and the United States of America, as well as the supervision of the National Banking and
Securities Commission in Mexico (“NBSC”, “Comisión Nacional Bancaria y de Valores” or “CNBV”)
and the U. S. Securities and Exchange Commission in the United States of America (“SEC”). Upon the terms of such resolutions,
the by-laws of the Company were amended in their entirety to conform them to the Stock Exchange Act (“Ley del Mercado de
Valores”) and ancillary regulations.



Maxcom is a company domiciled in Guillermo
González Camarena St. # 2000, C.P. 01210, México, D.F.



NOTE 2 — CONCESSIONS, FREQUENCY
RIGHTS AND INTERCONNECTION AGREEMENTS:



Concessions:



On February 3, 1997, the Mexican Ministry
of Communications and Transportation (“Secretaría de Comunicaciones y Transportes” or “SCT”) awarded
the Company a concession to install and operate a public telecommunications network in Mexico (the “concession”). This
concession is not exclusive. The initial term of the concession is 30 years and includes certain renewal rights. Subsequently,
on December 7, 1999, September 27, 2001 and December 2, 2004, the Company received amendments to the initial terms and conditions
of the concession.



The concession grants the Company the
right to provide local, national and international long-distance telephone services, data transfer services and other
value-added services in any part of the Republic of Mexico and, under the last amendment dated December 2, 2004, certain
obligations were set forth for the Company, as described in Note 20c.



On August 4, 2006, the SCT granted Maxcom
a concession to provide cable television services and audio in the city of Puebla. Shortly thereafter, the SCT issued the Convergence
Regulations, under which different types of telecommunications service providers are authorized to provide certain services in
addition to those included under the original concessions.



F-7







On January 17, 2007, the Mexican Federal
Telecommunications Commission (“Comisión Federal de Telecomunicaciones” or “Cofetel”) authorized
Maxcom to provide mobile virtual network operator (“MVNO”) services, based on its 1996 concession. This authorization
allows Maxcom to provide mobile telephone services throughout Mexico using its own brand, acquiring capacity from other concessionaires
of this service in Mexico. As a result of this authorization, Maxcom is the first, and thus far, the only telecommunications concessionaire
to offer quadruple-play services (voice, video, data and cellular) on an extensive basis under its own brand name. The terms of
the cable television and restricted radio concession and the MVNO authorization match the thirty-year term (expiring in 2026) of
the concession granted in 1996 and impose no further obligations, including minimum coverage or investment additional commitments.



Frequency rights:



On October 3, 1997, the Mexican Federal
Government through the SCT granted the Company ten frequency right concessions (the “frequency rights”) to use and exploit different bands of the radio-electric spectrum and to establish point-to-point
and point-to-multi-point microwave links; seven are nationwide point-to-point and three are regional point-to multipoint microwave
concessions. The frequency rights became effective on February 28, 1998, and shall remain in effect until 2018, see Note 12.



In accordance with the terms of these frequency
rights concessions, the Company must provide to the SCT a guarantee on its operations in the form of a surety bond and renew it
every year, see Note 20d.



Convergence agreement:



On October 2, 2006, the Mexican Federal
Government, through the SCT, issued a non-binding agreement for the rendering of services in convergence, which is known as “Agreement
of Convergence of Fixed Services of Local Telephone and Restricted Audio and/or Television that are provided through Wired and
Wireless Public Networks” (“Convergence Agreement”).



The convergence agreement allows certain
concessionaires of services of telecommunications to provide other services not included in the original concessions that were
granted to them. The suppliers of cable television will now be able to provide the service of internet and telephone. Also the
telephone operators, like Maxcom, will now be able to provide restricted services of audio and/or video. On October 13, 2006, Maxcom
notified the SCT its compliance and voluntary adhesion to the Convergence Agreement and, therefore, the SCT authorized to provide
the restricted services of audio and video besides to the previously authorized as a part of the original concessions of the public
telecommunications network.



Interconnection agreements:



On January 22, 1999, the Company entered
into a contract to provide local interconnection services (the “local interconnection agreement”) with Teléfonos
de México, S. A. B. de C. V. (“Telmex”), whereby the parties agree to render interconnection services to finish
local traffic in the other party’s network.



Likewise, the Company subscribed an interconnection
agreement to handle Maxcom’s long distance traffic towards Telmex’s local network and Telmex’s long distance
traffic towards Maxcom’s local network.



The Company has negotiated the signing
of various amending agreements to the local interconnection agreement with Telmex, to extend the original term of the local interconnection
contract, irrespective of the fact that the contract provides that the interconnection between the two companies is carried out
based on the clause of “continuous application”. This clause sets forth that upon termination of the first period,
the original terms and conditions of the contract will continue in full force and effect until the parties sign a new contract
to continue interconnecting their networks. This contract has had yearly updates up until now.



F-8







During 2003 and 2002, the Company entered
into various interconnection and reselling agreements with other local and long distance carriers and mobile phone companies, as
well as agreements which allow the Company to render public telephone services through the capacity acquired from mobile networks.



The rights and obligations under certain
interconnection contracts of Telereunion were transferred to Maxcom at the end of 2006 and beginning of 2007.



NOTE 3 — RELEVANT CORPORATE EVENTS:



Cofetel resolution on interconnection rates:



On June 14, 2011 the Company received from
Cofetel, the final decision on the dispute brought before this body on December 22, 2010 on the interconnection rate between the
Company and the mobile operators: Calling Party Pays (“CPP”) and Calling Party Pays National (“CPPN”) based
on the Articles 42, 43 and 44 of the Mexican Federal Telecommunications Law issued by the Department of Communications and Transportation.



Cofetel ruled that the CPP and CPPN rates
to be paid by Maxcom to major mobile operators would be Ps 0.3912/minute (without rounding), for the period from January 1st to
December 31, 2011. During 2010 the Company paid Ps 1.00/minute for the concept of interconnection charges. Cofetel set these rates
based on the principle of Total Service Long-Run Incremental Cost (LRIC).



Restructuring:



In 2012 and 2011 the Company incurred restructuring
charges of $5,899, $8,129, respectively, mainly due to severance payments, which are recognized in operating costs and expenses.



Liquidity:



In
recent quarters, the Company has experienced recurring losses, declines in revenues, cash flows and cash balances, which may
affect its liquidity if those trends are not reversed. As described in Note 14 - Senior notes, the Company’s
Senior Notes are due on December 15, 2014, for which semi-annual interest payments are due on June 2013, December 2013 and
June 2014. Each of such semi-annual interest payments exceed the Company’s cash and cash equivalents maintained as of
December 31, 2012. If one of such interest payments is not met, the entire Senior Notes outstanding become due immediately.



These
factors raise substantial doubt concerning the Company’s ability to continue operating as a going concern. The
ability of the Company to continue operating as a going concern is dependent upon its ability to obtain sufficient cash to
pay the outstanding interest payments and to restructure its Senior Notes (see Note 21 - subsequent events).  The
Company plans to address this situation be considering all of its alternative including, but not limited to:





| | • | savings
                                                                         in capital expenditures by ceasing capital expenditures
                                                                         for expansion projects and by limiting capital expenditures
                                                                         only to maintain the current operations;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | • | looking
                                                                         for new investors to obtain a capital injection;                                                                                                                                                                                                                                                              
| | • | Refinancing
                                                                         of the outstanding notes in order to extend their maturity;                                                                                                                                                                                                                                               
| | • | other
                                                                         restructuring proceedings, for instance by the commencement
                                                                         of a voluntary restructuring under Chapter 11 of the
                                                                         Unites States Bankruptcy Code.               





NOTE 4 — BASIS OF PREPARATION:



| | (a) | Statement of compliance
| | --- | -----------------------



These consolidated financial
statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”). These are the
Company’s first consolidated financial statements prepared in accordance with IFRS and IFRS 1, First-time Adoption of
International Financial Reporting Standards has been applied.



An explanation of how the transition
to IFRS has affected the reported financial position, financial performance and cash flows of the Company is provided in Note 22.



In accordance with the General
Corporation Law and the Company’s bylaws, the stockholders are empowered to modify the consolidated financial statements
after issuance.



F-9







The accompanying consolidated
financial statements were authorized for issuance on May 15th, 2013, by Mr. Salvador Álvarez, Maxcom’s
Chief Executive Officer, and consequently do not reflect events after this date.



| | (b) | Basis of measurement
| | --- | --------------------



The consolidated financial
statements have been prepared on the historical cost basis except for the following material items in the statement of financial
position:



| | - | Derivative financial instruments are measured at fair
value; and
| | - | ----------------------------------------------------------------



| | - | The cost of certain items of telephone network systems
and equipment at January 1, 2011, the date of transition to IFRS, was determined by reference to its revalued amount under the
previous accounting principles as its deemed cost.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | Functional and presentation currency
| | --- | ------------------------------------



These consolidated financial
statements are presented in Mexican pesos, which is the Company’s functional currency. All financial information presented
in Mexican pesos has been rounded to the nearest thousands, except when otherwise indicated.



| | (d) | Use of estimates and judgments
| | --- | ------------------------------



The preparation of financial
statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies
and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.



In preparing these consolidated
financial statements, the significant judgments made by management in applying the Company’s accounting policies and the
key sources of estimation uncertainty are expected to be the same as those that will apply to the first annual IFRS financial statements.



| | i) | Judgments
| | -- | ---------



The key judgments made in applying
accounting policies that have the most significant effect on the amounts recognized in these consolidated financial statements
are as follows:



Revenue recognition from
bundled contracts



Customer contracts that include
both equipment and bundled services (voice, data, pay TV or mobile services) are evaluated to determine whether the components
are separable. IFRS do not contain detailed guidance on how separate components within an arrangement should be identified. Management
uses its judgment to determine whether the component has stand-alone value to the customer and its fair value can be measured reliably
and, accordingly, accounts for the separable elements. The conclusions reached may have a significant effect on the amounts recognized
in the consolidated financial statements since they impact the timing of revenue recognition. See Note 5(k).



| | ii) | Use of estimates
| | --- | ----------------



Information about assumptions
and estimation uncertainties that have a significant risk of resulting in a material adjustment in the future are as follows:



F-10







Derivative financial instruments



As described in Notes 5(c) (iv)
below, the Company holds derivative financial instruments to hedge its foreign currency exposures. The Company manages such investments
and makes purchase and sale decisions based on their fair value in accordance with the Company ́s documented financial risk
management. For the description of the assumption applied in determining the fair value see Note 6.



Employee Benefits



As described in Note 5(i), the
Company recognizes the net obligation of the defined benefit plans, which is calculated separately for each plan by estimating
the amount of future benefit that employees have earned in return for their service in the current and prior years, discounted
to determine its present value. The calculation is performed annually by a qualified actuary using the projected unit credit method.



Valuation of long-lived assets



As described in Notes 5(e) and
(f) below, the Company reviews its depreciation and amortization methods and estimates of useful lives and residual values of long-lived
assets (including telephone network systems and equipment and intangibles and frequency rights) each annual reporting date and
adjusts them if appropriate.



For impairment testing, assets
are grouped into cash generating units (CGU), i.e., the smallest group of assets that generates cash inflows from continuing use
that are largely independent of the cash flows of other assets. Since the Company provides bundled services and the network and
certain intangibles are common across many services, Management has determined that such assets should be tested for impairment
at the level of the whole economic entity.



The recoverable amount of an
asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset or CGU. Key assumptions used in the calculation of recoverable amounts
are the discount rate, the asset’s salvage values and EBITDA1 margins.



As of December 31, 2012, based
on the Company’s impairment testing, no additional impairment loss was recognized.



Utilization of tax losses



The Company does not recognize
a deferred tax asset arising from unused tax losses or tax credits due to the uncertainty the Company and its subsidiaries have
sufficient taxable temporary differences or convincing other evidence that sufficient taxable profit will be available against
which the unused tax losses or unused tax credits can be utilized by the Company.










1EBITDA
for any year is net income (loss) excluding depreciation and amortization, net finance cost, other (income) expenses and tax.



F-11







Allowance of doubtful accounts
receivable



The allowance for doubtful accounts
represents the estimate of losses resulting from the failure or inability of our customers to make required payments. Determining
the allowance for doubtful accounts receivable requires significant estimates. The Company uses historical trends of the probability
of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current
economic and credit conditions suggest changes from historical trends. Management considers the provision to be sufficient to cover
the potential risk of uncollectible accounts; however, actual results may differ from the estimates resulting in a material adjustment
to the carrying amounts of the accounts receivable within the next financial year.



Estimates related to revenues



Generally installation expenses
are charged to our residential customers and related revenues are recognized when installation is complete. No installation expenses
are charged to our commercial clients and such costs are capitalized and amortized on a straight line basis for a period of 20
years. Installation cost capitalized are expensed once the relationship with the customer is terminated.



With respect to bundled contracts
where separate components are identified, revenue is allocated using the relative fair values of each component. Changes in actual
retention periods of customers or fair values assigned to different components could have a significant impact to the reported
amounts of revenues in our statement of operations within the next financial year.



NOTE 5 — SIGNIFICANT ACCOUNTING POLICIES:



The accounting policies set out below have
been applied consistently to all periods presented in these consolidated financial statements and in preparing the opening IFRS
statement of financial position at January 1, 2011 for the purposes of the transition to IFRS.



| | (a) | Basis of consolidation
| | --- | ----------------------



| | i. | Subsidiaries
| | -- | ------------



Subsidiaries are entities controlled
by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that
control commences until the date that control ceases.



Losses applicable to the non-controlling
interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests
to have a deficit balance.



| | ii. | Transactions eliminated on consolidation
| | --- | ----------------------------------------

Intra-group balances and transactions,
and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial
statements.



The consolidated financial
statements include the accounts of Maxcom and its subsidiaries of which it controls and has almost 100% of the voting shares:



F-12







|Subsidiary company                                |  | % |       |  | 
|------------------------------------------------- |  | - | ----- |  | 
|                                                  |  |   |       |  | 
|Asesores Telcoop, S. A. de C. V. (i)              |  |   | 99.9  |  | 
|Celmax Móvil, S. A. de C. V. (i)                  |  |   | 99.0  |  | 
|Corporativo en Telecomunicaciones, S. A. de C. V. |  |   | 99.9  |  | 
|Fundación Maxcom, A. C. (i)                       |  |   | 99.9  |  | 
|Maxcom Servicios Administrativos, S. A. de C. V.  |  |   | 99.9  |  | 
|Maxcom SF, S. A. de C. V.                         |  |   | 99.9  |  | 
|Maxcom TV, S. A. de C. V. (i)                     |  |   | 99.9  |  | 
|Maxcom USA, Inc. (i)                              |  |   | 100.0 |  | 
|Servicios MSF, S. A. de C. V. (iii)               |  |   | 99.9  |  | 
|Outsourcing Operadora de Personal, S. A. de C. V. |  |   | 99.9  |  | 
|Sierra Comunicaciones Globales, S. A. de C. V.    |  |   | 99.9  |  | 
|Sierra USA Communications, Inc. (ii)              |  |   | 100.0 |  | 
|TECBTC Estrategias de Promoción, S. A. de C. V.   |  |   | 99.9  |  | 
|Telereunión, S. A. de C. V. (ii)                  |  |   | 99.9  |  | 
|Telscape de México, S. A. de C. V. (ii)           |  |   | 99.9  |  | 










(i) These companies are in pre-operational stage.

(ii) These companies were formerly part of VAC Group
(former owner statements of Telereunion Group), which together and hereinafter are referred to as “Grupo Telereunión”.

(iii) Subsidiary established in 2011.



| | (b) | Foreign currency
| | --- | ----------------



| | i. | Foreign currency transactions
| | -- | -----------------------------



Transactions in foreign currencies
are translated to the functional currency of Company at exchange rates at the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that
date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at
the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign
currency translated at the exchange rate at the end of the period. Non-monetary assets and liabilities denominated in foreign currencies
that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value
was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the
exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognized in profit or
loss.



| | (c) | Financial instruments
| | --- | ---------------------



| | i. | Non-derivative financial assets
| | -- | -------------------------------



The Company initially recognizes
loans and receivables on the date that they are originated. All other financial assets (including assets designated as at fair
value through profit or loss) are recognized initially on the trade date, which is the date that the Company becomes a party to
the contractual provisions of the instrument.



F-13







The Company derecognizes a financial
asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual
cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial
asset are transferred. Any interest in such transferred financial assets that is created or retained by the Company is recognized
as a separate asset or liability.



Financial assets and liabilities
are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right
to offset the amounts and intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.



The Company classifies non-derivative
financial assets into the following categories: financial assets at fair value through profit or loss, loans and receivables.



Cash and cash equivalents



Cash and cash equivalents comprise
cash balances and call deposits with maturities of three months or less from the acquisition date that are subject to an insignificant
risk of changes in their fair value, and are used by the Company in the management of its short-term commitments.



Loans and receivables



Loans and receivables are financial
assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair
value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at
amortized cost using the effective interest method, less any impairment losses.



| | ii. | Non-derivative financial liabilities
| | --- | ------------------------------------



The Company initially recognizes
debt securities issued on the date that they are originated. All other financial liabilities are recognized initially on the trade
date at which the Company becomes a party to the contractual provisions of the instrument.



The Company derecognizes a financial
liability when its contractual obligations are discharged or cancelled or expire.



Financial assets and liabilities
are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right
to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.



The Company classifies non-derivative
financial liabilities into the other financial liabilities category. Such financial liabilities are recognized initially at fair
value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured
at amortized cost using the effective interest method.



Other financial liabilities
comprise mainly the senior notes (including accrued interest), obligations under capital leases, bank overdrafts, and trade and
other payables.



F-14







| | iii. | Share capital
| | ---- | -------------



Ordinary shares



Ordinary shares are classified
as equity. Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity, net
of any tax effects.



Repurchase, disposal and
reissue of share capital (treasury shares)



When share capital recognized
as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects,
is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the reserve
for repurchase shares. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase
in equity, and the resulting surplus or deficit on the transaction is presented in share premium.



| | iv. | Derivative financial instruments
| | --- | --------------------------------



The Company holds derivative
financial instruments to hedge its foreign currency exposures.



Derivatives are recognized initially
at fair value; attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition,
derivatives are measured at fair value. When a derivative financial instrument is not designated in a qualifying hedge, all changes
in its fair value are recognized immediately in profit or loss.

To mitigate exposure to Peso/U.S.
Dollar foreign exchange fluctuation risks, the Company sparingly uses derivative financial instruments such as cross currency swaps.



For accounting purposes, these
derivative instruments, although intended for hedging purposes from an economic perspective, have been designated as trading instruments
as they do not comply with all the requirements to qualify for hedge accounting. Derivative gains or losses are shown in the statement
of comprehensive income and statement of cash flows as either operating or financing items depending on the nature of the item
being economically hedged. In particular, the interest rate and cross currency swaps are presented within the derivative financial
instruments gain (loss) line item and within financing activities, in the statement of comprehensive income and statement of cash
flows, respectively.



| | (d) | Inventories
| | --- | -----------



Inventories consist of material
used to install telephone lines and network build-out, and are measured at the lower of cost and net realizable value. The cost
of inventories is based on the average cost formula, and includes expenditures incurred in acquiring the inventories, and other
costs incurred in bringing them to their existing location and condition.



Net realizable value is the
estimated selling price in the ordinary course of business, selling expenses.



The allowance for obsolescence
and slow-moving was evaluated on a six months basis, and according to the results of this evaluation, products are subject to a
slow-moving or obsolescence allowance.



F-15







| | (e) | Telephone network systems and equipment - Net
| | --- | ---------------------------------------------



| | i. | Recognition and measurement
| | -- | ---------------------------

Items of telephone network systems
and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The cost of certain items of
telephone network systems and equipment at January 1, 2011, the date of transition to IFRS, was determined by reference to its
revalued amount under the previous accounting principles which were restated through December 31, 2007, by applying factors derived
from the Mexican National Consumer Price Index (“NCPI”).



Cost includes expenditure that
is directly attributable to the acquisition of the asset. The Company constructs certain of its own network systems and related
facilities. The cost of self-constructed assets includes the cost of materials and direct labor, any other costs directly attributable
to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring
the site on which they are located, and borrowing costs on qualifying assets.



When parts of an item of telephone
network systems and equipment have different useful lives, they are accounted for as separate items (major components) of telephone
network systems and equipment.



The gain or loss on disposal
of an item of telephone network systems and equipment is determined by comparing the proceeds from disposal with the carrying amount
of the systems and equipment, and is recognized net within other income/expenses in profit or loss.

Maintenance and minor repair
costs are charged to results as incurred; replacement and improvement costs are capitalized. The cost and related allowances of
assets sold or retired are removed from the accounts, and any resulting profit or loss is reflected in the statement of results
of operations, in other expenses.



| | ii. | Subsequent costs
| | --- | ----------------



The cost of replacing a component
of an item of telephone network systems and equipment is recognized in the carrying amount of the item if it is probable that the
future economic benefits embodied within the component will flow to the Company, and its cost can be measured reliably. The carrying
amount of the replaced component is derecognized and recorded as an expense. The costs of the day-to-day servicing of systems and
equipment are recognized in profit or loss as incurred.



| | iii. | Depreciation
| | ---- | ------------



Depreciation is based on the
cost of an asset less its residual value. Significant components of individual assets are assessed, and if a component has a useful
life that is different from the remainder of that asset, then that component is depreciated separately.



Depreciation is recognized in
profit or loss on a straight-line basis over the estimated useful lives of each component of an item of telephone network systems
and equipment. Leased assets and leasehold improvements are depreciated over the shorter of the lease term and their useful lives
unless it is reasonably certain that the Company will obtain ownership by the end of the lease term. Land is not depreciated.



F-16







Installation costs include labor,
tools and supplies. Installation costs related to commercial customers are capitalized and amortized on a straight line basis for
a period of 20 years. Installation costs capitalized are expensed once the relationship with the customer is terminated.



The estimated useful lives for
the current and comparative periods are as follows:



|                                                     |  | Estimated
        useful
        life (years)
|---------------------------------------------------- |  | ---------------------------------------------
|                                                     |  |                                              
|Telecommunications network and equipment             |  | Between 23 and 24                            
|Public telephone equipment                           |  | 8                                            
|Leasehold improvements                               |  | Between 2 and 20                             
|Radio equipment                                      |  | 30                                           
|Line installation cost                               |  | 20                                           
|Electronic equipment                                 |  | 25                                           
|Capitalized expenses due to construction of networks |  | 30                                           
|Capitalized comprehensive financing cost             |  | 10                                           
|Computer equipment                                   |  | 5                                            
|Transportation equipment                             |  | 4                                            
|Office furniture                                     |  | 10                                           
|Other                                                |  | 10                                           
|Engineering equipment                                |  | 10                                           



Depreciation methods, useful
lives and residual values are reviewed at each annual reporting date and adjusted if appropriate.



| | (f) | Intangible assets
| | --- | -----------------



Intangible assets that are
acquired by the Company and have finite useful lives are measured at cost less accumulated amortization and impairment losses.



As previously mentioned (Note
2), the SCT awarded the Company, at no cost; a concession to install and operate a public telecommunications network for a 30-year
period. The concession and the related grant were initially recognized at their nominal amount, therefore, they have no recorded
value for financial reporting purposes and they are only disclosed in a note to these consolidated financial statements.



| | i. | Subsequent expenditure
| | -- | ----------------------



Subsequent expenditure is capitalized
only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure,
including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.



| | ii. | Amortization
| | --- | ------------



Amortization is based on the
cost of an asset less its residual value.



Amortization is recognized in
profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date
that they are available for use. The estimated useful lives for the current and comparative periods are as follows:



F-17









|                      |  | Useful
        life (years)
|--------------------- |  | ---------------------------
|                      |  |                            
|Infrastructure rights |  | 30 and 15                  
|Software licenses     |  | 3.3                        
|Frequency rights      |  | 20*                        



| | * | Amortization of frequency rights is amortized over the term of the frequency rights.
| | - | ------------------------------------------------------------------------------------



Amortization methods, useful
lives and residual values are reviewed at each financial year-end and adjusted if appropriate.



| | (g) | Leased assets
| | --- | -------------



Leases in terms of which the
Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition
the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments.
Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.



Other leases are operating
leases and are not recognized in the Company’s statement of financial position.



| | (h) | Impairment
| | --- | ----------



| | i. | Non- derivative financial assets
| | -- | --------------------------------



A financial asset not carried
at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it
is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition
of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated
reliably.



Objective evidence that financial
assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Company on terms that
the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment
status of borrowers or issuers in the Company, economic conditions that correlate with defaults or the disappearance of an active
market for a security.



Loans and receivables



The Company considers evidence
of impairment for receivables at both a specific asset and collective level. All individually significant receivables are assessed
for specific impairment. All individually significant loans and receivables found not to be specifically impaired are then collectively
assessed for any impairment that has been incurred but not yet identified. Loans and receivables that are not individually significant
are collectively assessed for impairment by grouping together receivables with similar risk characteristics.



F-18







In assessing collective impairment
the Company uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted
for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely
to be greater or less than suggested by historical trends.



An impairment loss in respect
of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value
of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in profit
or loss and reflected in an allowance account against loans and receivables. Interest on the impaired asset continues to be recognized.
When a subsequent event (e.g. repayment by a debtor) causes the amount of impairment loss to decrease, the decrease in impairment
loss is reversed through profit or loss.

The Company records an allowance
in the amount of 90% of accounts receivable with balances due over 90 but less than 119 days old, and of 100% of accounts receivable
due over 120 days old, except when there is a collection agreement with a client. In such cases, the allowance amount is 30% with
balances due over 90 days if there is not a settlement negotiated with the client. Accounts handed over to the Company’s
legal collection services are reserved up to a 100%, or less depending on the success rate indicated by the attorney handling the
account.



| | ii. | Non-financial assets
| | --- | --------------------



The carrying amounts of the
Company’s non-financial assets, inventories, and deferred tax assets, are reviewed at each reporting date to determine whether
there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An
impairment loss is recognized if the carrying amount of an asset or its related CGU exceeds its estimated recoverable amount.



The recoverable amount of an
asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot
be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows of other assets or CGUs.



The Company’s corporate
assets do not generate separate cash inflows and are utilized by more than one CGU. Corporate assets are allocated to CGUs on a
reasonable and consistent basis and tested for impairment as part of the testing of the CGU to which the corporate asset is allocated.



Impairment losses are recognized
in profit or loss. Impairment losses recognized in respect of CGUs are allocated to reduce the carrying amounts of the assets in
the CGU (group of CGUs) on a pro rata basis.



Impairment losses recognized
in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment
loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed
only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortization, if no impairment loss had been recognized.



F-19







| | (i) | Employee benefits
| | --- | -----------------



| | i. | Defined benefit plans
| | -- | ---------------------



A defined benefit plan is a
post-employment benefit plan other than a defined contribution plan. The Company’s net obligation in respect of defined benefit
pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return
for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized
past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on
government bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in
the same currency in which the benefits are expected to be paid.



The plant workers are entitled
to a seniority premium as stated in article 162 of Mexican Federal Labor Law, in accordance with the following rules:



| | I. | Seniority premiums consist of the amount of twelve days salary for each year of service;
| | -- | ----------------------------------------------------------------------------------------



| | II. | Seniority premiums are paid to workers who voluntarily separate its employment after they have
completed fifteen years of service, at least. Also be paid to the ones that separate with justification and those who are separated
from their employment, regardless of justification or lack of justification for dismissal.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The calculation is performed
annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company,
the recognized asset is limited to the total of any unrecognized past service costs and the present value of economic benefits
available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate
the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the
Company. An economic benefit is available to the Company if it is realizable during the life of the plan, or on settlement of the
plan liabilities. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees
is recognized in profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent
that the benefits vest immediately, the expense is recognized immediately in profit or loss.



All actuarial gains and losses
at January 1, 2011, the date of transition to IFRS, were recognized in deficit from prior years. The Company recognizes all actuarial
gains and losses arising subsequently from defined benefit plans and expenses related to defined benefit plans in personnel expenses
in profit or loss.



The Company recognizes gains
or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss
on curtailment comprises any resulting change in the fair value of plan assets, change in the present value of defined benefit
obligation and any related actuarial gains or losses and past service cost that had not previously been recognized.



As of December 31, 2012 and
for purposes of recognizing benefits upon retirement, the remaining average service life of employees entitled to plan benefits
approximates 27.8 years.



F-20







| | ii. | Termination benefits
| | --- | --------------------



Termination benefits are recognized
as an expense when the Company is committed demonstrably, without realistic possibility of withdrawal, to a formal detailed plan
to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made
to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized as an expense if the Company
has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be
estimated reliably. If benefits are payable more than 12 months after the reporting date, then they are discounted to their present
value.



| | iii. | Short-term employee benefits
| | ---- | ----------------------------



Short-term employee benefit
obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized
for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive
obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.



| | iv. | Share-based payment transactions
| | --- | --------------------------------



For equity instruments that
were granted to employees after November 7, 2002 that will vest after January 1, 2011, date of transition to IFRS, the grant-date
fair value of share-based payment awards is recognized as an employee expense, with a corresponding increase in equity, over the
period that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect
the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount
ultimately recognized as an expense is based on the number of awards that meet the related service and non-market performance conditions
at the vesting date.



For share-based payment awards
with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there
is no true-up for differences between expected and actual outcomes.



Stock options are granted to
members of the Board of Directors, Company officers and employees, as described in Note 19.



The net amount of the stock
options exercised, excluding any expenses or cost due to transactions related to the payment, are credited to shareholders’
equity and to additional paid-in capital at face value. On the other hand, cash received from exercised stock options is recorded
as equity in additional paid-in capital. During 2012 no options were exercised, in 2011 options were exercised in the amount of
$7,559.



F-21







| | (j) | Provisions
| | --- | ----------



A provision is recognized if,
as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it
is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting
the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks
specific to the liability. The unwinding of the discount is recognized as finance cost.



| | (k) | Revenue
| | --- | -------



Revenues from the sale of telephone
equipment to clients are recognized at the time of delivery of said equipment and the risk and rewards are transferred to the customer.
Revenues from services are recognized as rendered.



Generally installation expenses
are charged to our residential customers and related revenues are recognized when installation is complete.



Revenues from public telephone
services are recognized based on the cash collected and the estimated uncollected cash from services rendered at the date of the
consolidated financial statements.



Revenues from interconnection
services are recognized on accrual basis. The Company entered into local interconnection agreements with various telephone companies
under the “bill and keep” compensatory clause. In accordance with these agreements, if the imbalance between local
calls originated from the other telephone concessionaire and completed by Maxcom, and the calls originated from Maxcom and completed
by the other telephone company over the course of one month do not exceed an established percentage, there will be no payment of
an interconnection rate charge to the user for interconnection services. However, if the imbalance exceeds that percentage in a
particular month, the Company or the telephone concessionaire is subject to a charge per minute. The aforementioned percentage
of imbalance was 5% during the years 2012 and 2011.



The Company also has interconnection
agreements for long-distance and mobile services with other concessionary telephone companies. However, they do not include the
clause of the “bill and keep” compensatory agreement.



Revenues from pay television
services are recognized as rendered.



Revenues from mobile telephone
services are recognized on monthly basis when the traffic with suppliers of mobile telephone has been reconciled and the charge
to the client has been recorded.



For the mobile telephone revenues
the Company evaluates the revenue recognition of multiple-element arrangements evaluating the time and manner in which revenues
for the different accounting units should be recognized. For the Company the separated accounting units are the sale of mobile
telephone equipment and mobile services.



F-22







Customer contracts that include
both equipment and bundled services (voice, data, pay TV or mobile services) are evaluated to determine whether the components
are separable. Revenue from bundled services is recognized in the month in which the services are provided. Bundle revenues are
distributed among voice, data, pay TV or mobile services.



Revenues from lease of transmission
capacity through the fiber optic ring are recorded in deferred revenue when billed in advance and then recognized ratably into
revenue over the term of the contract.



| | (l) | Lease payments
| | --- | --------------



Payments made under operating
leases are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized
as an integral part of the total lease expense, over the term of the lease.



Minimum lease payments made
under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense
is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance
of the liability.



Contingent lease payments are
accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.



Determining whether an arrangement
contains a lease



At inception of an arrangement,
the Company determines whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfillment
of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement
conveys to the Company the right to control the use of the underlying asset.



At inception or upon reassessment
of the arrangement, the Company separates payments and other consideration required by such an arrangement into those for the lease
and those for other elements on the basis of their relative fair values. If the Company concludes for a finance lease that it is
impracticable to separate the payments reliably, then an asset and a liability are recognized at an amount equal to the fair value
of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance charge on the liability
is recognized using the Company’s incremental borrowing rate.



| | (m) | Finance income and finance costs
| | --- | --------------------------------



Finance income comprises interest
income on funds invested (including available-for-sale financial assets), dividend income, fair value gains on financial assets
at fair value through profit or loss, gains on the re-measurement to fair value of any pre-existing interest in an acquire. Interest
income is recognized as it accrues in profit or loss, using the effective interest method. Dividend income is recognized in profit
or loss on the date that the Company’s right to receive payment is established, which in the case of quoted securities is
normally the ex-dividend date.



Finance costs comprise interest
expense on borrowings, unwinding of the discount on provisions, fair value losses on financial assets at fair value through profit
or loss, impairment losses recognized on financial assets (other than trade receivables).



F-23







Borrowing costs that are not directly attributable
to the acquisition, construction or production of a qualifying asset are recognized in profit or loss using the effective interest
method.



| | (n) | Income Tax
| | --- | ----------



Income tax expense comprises
current and deferred tax. Current tax and deferred tax is recognized in profit or loss except to the extent that it relates to
a business combination, or items recognized directly in equity or in other comprehensive income.



Current tax is the expected
tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of previous years. Current tax payable also includes any tax liability
arising from the declaration of dividends.



Deferred tax is recognized
in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for taxation purposes. Deferred tax is not recognized for:



| | 1. | Temporary differences on the initial recognition of assets or liabilities in a transaction that
is not a business combination and that affects neither accounting nor taxable profit or loss;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Temporary differences related to investments in subsidiaries and jointly controlled entities to
the extent that it is probable that they will not reverse in the foreseeable future; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Taxable temporary differences arising on the initial recognition of goodwill.
| | -- | -----------------------------------------------------------------------------



Deferred tax is measured at
the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted
or substantively enacted by the reporting date.

Deferred tax assets and liabilities
are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes
levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax
liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.



A deferred tax asset is recognized
for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable
profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related tax benefit will be realized.



Under current tax law, companies
will be required to pay the greater of ISR (“Impuesto sobre la renta” or Income tax) or IETU (“Impuesto empresarial
a tasa única” or Flat rate business tax). If IETU is payable, the payment is considered final and not subject to recovery
in subsequent years. The income tax law current tax reforms from January 1, 2010, the income tax rate for fiscal years 2010 through
2012 is 30%, for 2013 is 29% and 28% for 2014 onwards. IETU rate is 17.5% for 2010 onwards.



As of December 31, 2012, the
Company and its Mexican subsidiaries are subject to IT and IETU individually, which means that they are not consolidated for tax
payment calculations.



F-24











| | (o) | Earnings per share
| | --- | ------------------



The Company presents basic
and diluted earnings per share data for its ordinary shares. Basic earnings per share is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period,
adjusted for own shares held. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary
shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all
dilutive potential ordinary shares, which comprise share options granted to employees.



| | (p) | Segment reporting
| | --- | -----------------



An operating segment is a component
of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses
that relate to transactions with any of the Company’s other components and which is reviewed regularly by the Company’s
CEO to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial
information is available. The Company has determined that it has one operating segment: Telecommunications. The segment offers
different service products to its customers based on the type of market, divided as follows: residential, commercial, public telephone,
wholesale and others. The financial information reviewed by our chief operating decision maker includes revenue by market, but
operating expenses and assets are reported on a combined basis for the entire operating unit. The Company also divided its operating
segment in the following geographical destinations: Metropolitan Area, Central-South, and North (all within Mexico).



| | (q) | Business and credit concentration
| | --- | ---------------------------------



The Company provides its services
to a vast array of customers, thus avoiding dependency on any single customer. The Company carried out significant transactions
with certain suppliers, mainly: Radiomóvil Dipsa, S.A. de C.V., Telmex and Pegaso PCS, S. A. de C. V.



NOTE 6 — FINANCIAL RISK MANAGEMENT:



Overview



The Company has exposure to the following
risks from its use of financial instruments: credit risk; liquidity risk and market risk.



This note presents information about the
Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing
risk, and the Company’s management of capital. Further quantitative disclosures are included throughout these consolidated
financial statements.



Risk management framework



The Board of Directors has overall responsibility
for the establishment and oversight of the Company’s risk management framework. The Board has established the management
and the Audit Committee as responsible for developing and monitoring the Company’s risk management practices. The committee
reports regularly to the Board of Directors on its activities.



F-25







The Company’s risk management practices
are established to identify and analyze the risks faced by the Company, to monitor risks. The Company, through its training and
management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees
understand their roles and obligations.



The Company Audit Committee oversees how
management monitors compliance with the Company’s risk management practices and procedures, and reviews the adequacy of the
risk management framework in relation to the risks faced by the Company.



Credit risk



Credit risk is the risk of financial loss
to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally
from the Company’s receivables from customers and investment securities.



Accounts receivables



The Company’s exposure to credit
risk is influenced mainly by the individual characteristics of each customer. The Company provides its services to a vast array
of customers, thus avoiding dependency on any single customer; therefore, there is no concentration of credit risk. Trade receivables
consist of a large number of customers, spread across diverse industries and geographical areas.



The Company has adopted a policy of only
dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk
of financial loss from defaults. The Company research on the credit behavior of its customers. This information is supplied by
independent rating agencies (“Buró de Crédito” or “Círculo de Crédito”) where
available and, if not available, the Company uses other publicly available financial information and its own trading records to
rate its major customers. Where appropriate, guarantees are required in the form of deposits (customer deposits). The Company’s
exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded
is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved
by management and the Audit Committee.



As described in Note 5(h), the Company
recognizes impairment of receivables through an allowance for doubtful accounts which is further detailed in Note10 below.



F-26







Impairment losses



Aging of trade receivables at the reporting
date:



|                     |  | December 31, 2012 |           |  | December 31, 2011 |  |         | January 1, 2011 | 
|-------------------- |  | ----------------- | --------- |  | ----------------- |  | ------- | --------------- | 
|                     |  | Gross             |           |  | Impairment        |  |         | Gross           | 
|Not past due         |  | $                 | 456,543   |  |                   |  | -       |                 | 
|Past due 0-90 days   |  |                   | 108,241   |  |                   |  | -       |                 | 
|Past due 91-120 days |  |                   | -         |  |                   |  | -       |                 | 
|More than 121 days   |  |                   | 635,880   |  |                   |  | 585,990 |                 | 
|                     |  | $                 | 1,200,664 |  |                   |  | 585,990 |                 | 



See in Note 9 the movement in the allowance
for doubtful accounts.



Investments



The Company limits its exposure to credit
risk by investing only in overnight government instruments and only with trustworthy banks. Management does not expect any counterparty
to fail to meet its obligations.



Liquidity risk



Liquidity risk is the risk that the Company
will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash
or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always
have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable
losses or risking damage to the Company’s reputation.



The Company monitors cash flow requirements
and optimizing its cash return on investments. Typically the Company ensures that it has sufficient cash on demand to meet expected
operational expenses, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances
that cannot reasonably be predicted, such as natural disasters.



F-27







The following are the Senior Notes and
Accounts Payable maturities as of December 31, 2012 and 2011 including estimated interest payments:



|As of December 31, 2012                                 |  | Interest rate porcentage |   | Less than 1 year |         |  | From 1 year to 2 years |  |           | From 3 to 5 years |  |  | Total     | 
|------------------------------------------------------- |  | ------------------------ | - | ---------------- | ------- |  | ---------------------- |  | --------- | ----------------- |  |  | --------- | 
|                                                        |  |                          |   |                  |         |  |                        |  |           |                   |  |  |           | 
|Senior Notes                                            |  | 11                       | % |                  |         |  |                        |  | 2,282,774 |                   |  |  |           | 
|Fixed annual interest rate of 11%, payable semiannually |  |                          |   |                  | 253,464 |  |                        |  | 253,464   |                   |  |  |           | 
|Accounts payable                                        |  |                          |   |                  | 406,532 |  |                        |  |           |                   |  |  |           | 
|Interest accounts payable                               |  | Floating rate            |   |                  | 966     |  |                        |  | 737       |                   |  |  | 15        | 
|                                                        |  |                          |   |                  |         |  |                        |  |           |                   |  |  |           | 
|As of December 31, 2011                                 |  |                          |   |                  |         |  |                        |  |           |                   |  |  |           | 
|                                                        |  |                          |   |                  |         |  |                        |  |           |                   |  |  |           | 
|Senior Notes                                            |  | 11                       | % |                  |         |  |                        |  |           |                   |  |  | 2,744,287 | 
|Fixed annual interest rate of 11%, payable semiannually |  |                          |   |                  | 272,334 |  |                        |  | 544,669   |                   |  |  |           | 
|Accounts payable                                        |  |                          |   |                  | 215,773 |  |                        |  |           |                   |  |  |           | 
|Interest accounts payable                               |  | Floating rate            |   |                  | 720     |  |                        |  | 587       |                   |  |  | 17        | 



Market risk



Market risk is the risk that changes in
market prices, such as foreign exchange rates, interest rates will affect the Company’s income or the value of its holdings
of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimizing the return. The Group buys and sells derivatives, and also incurs financial liabilities, in order
to manage market risks. All such transactions are carried out within the guidelines set by Management Board and the Audit Committee.



Currency risk



We entered into currency swap transactions
with Morgan Stanley (France), SAS to minimize the exchange rate risks related to the coupon payments with respect to U.S.$150 million
aggregate principal amount of our senior notes.



In May 2011 we amended the cross currency
swap agreements with Morgan Stanley (France), SAS to delete from the agreements the clause authorizing Morgan Stanley to terminate
the agreements in case the credit rating of the Company continues to decline. In counterpart, we agreed to deposit U.S.$1.5 million
in a collateral account in Morgan Stanley.



In respect of other monetary assets and
liabilities denominated in foreign currencies, the Company’s policy is to ensure that its net exposure is kept to an acceptable
level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. Note 15 provides the
details on the foreign currency position of the Company as of the date of the statements of financial position.



F-28







Sensitivity analysis



A strengthening of the US Dollar, as indicated
below, against the Mexican peso at December 31, 2012 would have increased loss by the amount shown below. This analysis is based
on a 10% foreign currency exchange rate variance on the Senior Notes liability at the carrying amount of U.S.$177.1 million The
analysis assumes that all other variables, in particular interest rates, remain constant.



|                              |  | Loss |        
|----------------------------- |  | ---- | -------
|December 31, 2012             |  |      |        
|US Dollar (10% strengthening) |  | $    | 230,410



Interest rate risk



The senior notes due 2014 constitute substantially
all of the Company’s indebtedness and bear interests at a fixed rate. However, the Company has entered into currency swaps
that change the profile of interest payments of a portion of its debt to achieve the desired mix between fixed and floating rate
borrowings. Note 16 further describes these swap transactions.



The exposure to interest rate risk arising
from financial assets held is not deemed material to the Company’s financial statements.



Sensitivity analysis



The Company manages the market risk (interest
rate risk and currency risk) of the derivative financial instrument in its position through the use of value at risk (VaR). VaR
is a technique that produces estimates of the potential negative change in the market value of a portfolio over a specified time
horizon at a given confidence level. 500 historic items were observed. The VaR methodology used by Maxcom is a parametric model
with a 99% confidence level and one-day time horizon. The table below sets out the VaR for Maxcom regarding the financial derivatives
held in position as of:



|Month End     |  | Fair
                                                                  Value Derivative |        |  | Value at Risk@99% | 
|------------- |  | --------------------------------------------------------------------------------------- | ------ |  | ----------------- | 
|              |  |                                                                                         |        |  |                   | 
|December 2012 |  | $                                                                                       | 32,141 |  |                   | 
|December 2011 |  |                                                                                         | 81,641 |  |                   | 



VaR results presented above imply that
Maxcom would expect to incur a loss in December, 2012 of $5,844 and December 2011 $13,322, under normal market conditions with
a 99% confidence level. Such VaR measure has limitations that are described as follows:



| | 1. | Historical data may not provide the best estimate of the joint distribution of risk factor changes
in the future and may fail to capture the risk of possible extreme adverse market movements which have not occurred in the historical
window used in the calculations.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | VaR using a 99% confidence level does not reflect the extent of potential losses beyond that percentile.
Even within the model used there is a one percent probability that losses would exceed the VaR.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | VaR using a one-day time horizon does not fully capture the market risk of positions that cannot
be liquidated or hedged within one day.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------



F-29







| | 4. | These limitations and the nature of the VaR measure mean that Maxcom can neither guarantee that
losses will not exceed the VaR amounts indicated nor that losses in excess of the VaR amounts will not occur more frequently than
once in 20 business days.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5. | The Company considers that under current market conditions the VaR measure reported represents
reasonably the risk exposure of its derivatives portfolio.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



The characteristics of the cross currency
swaps acquired by Maxcom match perfectly the characteristics of the primary position (debt), thus a 100% effectiveness of the hedge
is expected notwithstanding with the stress scenario or sensitivity test used, due to the fact that any change in fair value or
the Cross Currency Swap will offset the change in fair value for the primary position.



The market risk factors that affect the
fair value of the financial derivatives are MXN Rate TIIE, USD Rate LIBOR and FX Rate MXN/USD.



Capital management



The Board’s policy is to maintain
a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business.
Capital consists of capital stock, repurchase of shares reserve, additional paid-in capital and accumulated losses of the Company.



From time to time the Company purchases
its own shares on the market; the timing of these purchases depends on market prices. Primarily the shares are intended to be used
for issuing shares under the Company’s share option program. Buy and sell decisions are made on a specific transaction basis
by the General Management Director; the Company does not have a defined share buy-back plan.



There were no changes in the Group’s
approach to capital management for the year ended December 31, 2012.



Fair value of financial instruments
carried at amortized cost



Except as detailed in the following table,
the directors consider that the carrying amounts of financial liabilities recognized in the consolidated financial statements for
the years ended December 31, 2012 and 2011, approximate their fair values.



|                                  |  | December 31, 2012 |           |  | December 31, 2011 | 
|--------------------------------- |  | ----------------- | --------- |  | ----------------- | 
|                                  |  | Carrying amount   |           |  | Fair Value        | 
|Senior notes and accrued interest |  |                   | 2,294,694 |  |                   | 
|Obligations under capital leases  |  |                   | 10,661    |  |                   | 



The fair values of financial liabilities
are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.



Determination of fair value



A number of the Company’s accounting
policies and disclosures require the determination of fair value, for financial assets and liabilities. Fair values have been determined
for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions
made in determining fair values is disclosed in the notes specific to that asset or liability.



F-30







Trade and other receivables

The fair value of accounts receivables
is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair
value is determined for disclosure purposes.



Derivatives

The fair value of the cross currency forward
exchange contracts is estimated by discounting the difference between the contractual forward price and the current forward price
for the residual maturity of the contract using a risk-free interest rate (based on government bonds). The fair value of interest
rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based
on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date. Fair
values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity
and counterparty when appropriate.



Share-based payment transactions

The fair value of the employee share options
and the share appreciation rights is measured using the Black-Scholes formula. Measurement inputs include share price on measurement
date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes
expected due to publicly available information), weighted average expected life of the instruments (based on historical experience
and general option holder behavior), expected dividends, and the risk-free interest rate (based on government bonds). Service and
non-market performance conditions attached to the transactions are not taken into account in determining fair value.



Fair value hierarchy



The different levels have been defined
as follows:



| | · | Level 1: quoted prices (unadjusted) in
active markets for identical assets or liabilities.
| | - | ------------------------------------------------------------------------------------------

| | · | Level 2: inputs other than quoted prices
included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived
from prices).
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Level 3: inputs for the asset or liability
that are not based on observable market data (unobservable inputs).
| | - | --------------------------------------------------------------------------------------------------------------



NOTE 7 — OPERATING SEGMENTS:



The Company operates in the telecommunication
business sector and has only one reportable segment. The segment offers different service products to its customers based on the
type of market divided as follows: residential, commercial, public telephone, wholesale and others. However, most of the infrastructure
is commonly used by the different services products in all markets and equally specific telecommunications services, such as local
service, long distance and “calling party pays” (CPP) that can be provided in one or more markets. Therefore, discrete
financial information is not available because there is no measure of segment profit or loss by each of these markets. The financial
information reviewed by our chief operating decision maker includes revenue by market, but operating expenses and assets are reported
on a combined basis for the entire operating unit.



F-31







Information about products and services



The revenue is divided as shown below:



|Segment          |  | For the year ended December 31, 2012 |           |  | For the year ended December 31, 2011 |  
|---------------- |  | ------------------------------------ | --------- |  | ------------------------------------ | -
|                 |  |                                      |           |  |                                      |  
|Residential      |  | $                                    | 1,003,507 |  |                                      | $
|Business         |  |                                      | 632,027   |  |                                      |  
|Public telephone |  |                                      | 174,887   |  |                                      |  
|Wholesale        |  |                                      | 374,124   |  |                                      |  
|Others           |  |                                      | 16,707    |  |                                      |  
|Total revenues   |  | $                                    | 2,201,252 |  |                                      | $



Each of the above markets is comprised
of homogeneous customers.



Information about geographical areas



The information by geographical location
(all within Mexico) including revenue, total assets, and additions of the telephone network, systems and equipment is as follows:



|Services                                                                                    |  | Metropolitan Area |           |  | Central- South |   |           | North |  |   | Total   | 
|------------------------------------------------------------------------------------------- |  | ----------------- | --------- |  | -------------- | - | --------- | ----- |  | - | ------- | 
|                                                                                            |  |                   |           |  |                |   |           |       |  |   |         | 
|Period for the year ended December 31, 2012:                                                |  |                   |           |  |                |   |           |       |  |   |         | 
|Local                                                                                       |  | $                 | 1,084,411 |  |                | $ | 616,197   |       |  | $ | 9,958   | 
|Long distance                                                                               |  |                   | 201,492   |  |                |   | 186,833   |       |  |   | 46,480  | 
|Rent of dedicated links                                                                     |  |                   | 208       |  |                |   | -         |       |  |   | -       | 
|Sale of equipment to customers                                                              |  |                   | 12,886    |  |                |   | 2,023     |       |  |   | 3       | 
|Capacity leasing                                                                            |  |                   | 40,761    |  |                |   | -         |       |  |   | -       | 
|Total revenue                                                                               |  | $                 | 1,339,758 |  |                | $ | 805,053   |       |  | $ | 56,441  | 
|Total assets as of December 31, 2012                                                        |  | $                 | 3,532,318 |  |                | $ | 1,057,631 |       |  | $ | 407,669 | 
|Acquisition of telephone network systems and equipment for the year ended December 31, 2012 |  | $                 | 576,391   |  |                | $ | 2,910     |       |  | $ | 4,089   | 



|Services                                                                                    |  | Metropolitan Area |           |  | Central- South |   |           | North |  |   | Total   | 
|------------------------------------------------------------------------------------------- |  | ----------------- | --------- |  | -------------- | - | --------- | ----- |  | - | ------- | 
|                                                                                            |  |                   |           |  |                |   |           |       |  |   |         | 
|Period for the year ended December 31, 2011:                                                |  |                   |           |  |                |   |           |       |  |   |         | 
|Local                                                                                       |  | $                 | 1,278,055 |  |                | $ | 651,898   |       |  | $ | 34,587  | 
|Long distance                                                                               |  |                   | 208,406   |  |                |   | 138,967   |       |  |   | 24,089  | 
|Rent of dedicated links                                                                     |  |                   | 233       |  |                |   | -         |       |  |   | -       | 
|Sale of equipment to customers                                                              |  |                   | 2,460     |  |                |   | 1,572     |       |  |   | 11      | 
|Capacity leasing                                                                            |  |                   | 35,663    |  |                |   | -         |       |  |   | -       | 
|Total revenue                                                                               |  | $                 | 1,524,817 |  |                | $ | 792,437   |       |  | $ | 58,687  | 
|Total assets as of December 31, 2011                                                        |  | $                 | 3,934,072 |  |                | $ | 1,076,125 |       |  | $ | 398,032 | 
|Acquisition of telephone network systems and equipment for the year ended December 31, 2011 |  | $                 | 328,269   |  |                | $ | 75,710    |       |  | $ | 15,651  | 



F-32







Information about major customers



There is no single external customer for
whom its revenues amount to 10% or more of a Company’s revenues.



NOTE 8 — CASH AND CASH EQUIVALENTS:



|                 |  | December 31, |         |  | December 31, |   |         | January 1, | 
|---------------- |  | ------------ | ------- |  | ------------ | - | ------- | ---------- | 
|                 |  | 2012         |         |  | 2011         |   |         | 2011       | 
|Cash             |  | $            | 71,940  |  |              | $ | 133,313 |            | 
|Cash equivalents |  |              | 74,576  |  |              |   | 263,267 |            | 
|Total            |  | $            | 146,516 |  |              | $ | 396,580 |            | 



NOTE 9 – ACCOUNTS RECEIVABLE:



|                                |  | December 31, |           |   | December 31, |   |           | January 1, | 
|------------------------------- |  | ------------ | --------- | - | ------------ | - | --------- | ---------- | 
|                                |  | 2012         |           |   | 2011         |   |           | 2011       | 
|                                |  |              |           |   |              |   |           |            | 
|Accounts receivable             |  | $            | 1,200,664 |   |              | $ | 1,159,310 |            | 
|Allowance for doubtful accounts |  |              | (585,990  | ) |              |   | (504,570  | )          | 
|Total current assets            |  | $            | 614,674   |   |              | $ | 654,740   |            | 



The credit period is generally 25 days
from the date of the invoice. Certain customers are granted extended credit periods up to 3 months.



Trade receivables disclosed above include
amounts (see below for aged analysis) that are past due at the end of the reporting period for which the Company has not recognized
an allowance for doubtful accounts because there has not been a significant change in credit quality and the amounts are still
considered recoverable.



Age of receivables that are past due but
not impaired



|                   |  | December 31, |        |  | December 31, |   |        | January 1, | 
|------------------ |  | ------------ | ------ |  | ------------ | - | ------ | ---------- | 
|                   |  | 2012         |        |  | 2011         |   |        | 2011       | 
|60-90 days         |  | $            | 45,229 |  |              | $ | 33,100 |            | 
|Average age (days) |  |              | 75     |  |              |   | 75     |            | 



Movement in the allowance for doubtful
accounts



|                                 |  | 2012 |         |  | 2011 |   |         | January
                                                                  1, 2011 | 
|-------------------------------- |  | ---- | ------- |  | ---- | - | ------- | --------------------------------------------------------------------------------- | 
|                                 |  |      |         |  |      |   |         |                                                                                   | 
|Balance at beginning of the year |  | $    | 504,570 |  |      | $ | 316,018 |                                                                                   | 
|Charged to cost and expenses     |  |      | 81,420  |  |      |   | 188,552 |                                                                                   | 
|Deductions                       |  |      | -       |  |      |   | -       |                                                                                   | 
|Balance at end of year           |  | $    | 585,990 |  |      | $ | 504,570 |                                                                                   | 



F-33







NOTE 10 – DEFERRED INCOME TAXES:



| | (a) | Recognized deferred tax assets and liabilities
| | --- | ----------------------------------------------



The tax effects of temporary
differences that give rise to significant portions of the deferred income tax assets and liabilities, at December 31, 2012 and
2011 are presented below:



|                                                                         |  | IT   |       
|------------------------------------------------------------------------ |  | ---- | ------
|                                                                         |  | 2012 |       
|Deferred tax assets:                                                     |  |      |       
|Employee benefits                                                        |  | $    | 1,259 
|Provisions                                                               |  |      | 19,024
|                                                                         |  |      |       
|Deferred tax assets                                                      |  |      | 20,283
|                                                                         |  |      |       
|Deferred tax liabilities:                                                |  |      |       
|Prepaid expenses                                                         |  |      | 4,814 
|Advance payments                                                         |  |      | 5,676 
|Derivative financial instruments                                         |  |      | -     
|                                                                         |  |      |       
|Deferred tax liabilities                                                 |  |      | 10,490
|                                                                         |  |      |       
|Net deferred tax asset, recorded in the statements of financial position |  | $    | 9,793 



Deferred tax assets are recognized only
to the extent that it is probable that taxable profit will be available, against which the deductible temporary differences can
be utilized. In assessing the recoverability of deferred tax assets, management considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies past
in making this assessment. As of December 31, 2012 and 2011, the Company had not recognized deferred tax assets amounting to $834,640
and $870,596, respectively.



| | (b) | Total income tax expense (benefit) for the
years ended December 31, 2012 and 2011 amounted to $15,560 and $(14,890), respectively.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------



F-34







| | (c) | Reconciliation of effective tax rate:
| | --- | -------------------------------------





|                                                                   |  | 2012 |     |    | 2011 | 
|------------------------------------------------------------------ |  | ---- | --- | -- | ---- | 
|                                                                   |  | %    |     |    | $    | 
|Loss before income taxes                                           |  |      |     |    |      | 
|Total income tax expense (benefit)                                 |  |      | 13  | %  |      | 
|                                                                   |  |      |     |    |      | 
|Income tax expense (benefit) using the Company ́s domestic tax rate |  |      | (30 | )% |      | 
|                                                                   |  |      |     |    |      | 
|Employee Statutory Profit Sharing                                  |  |      | 1   | %  |      | 
|Inflationary effect                                                |  |      | (5  | )% |      | 
|Non-deductible expenses                                            |  |      | 24  | %  |      | 
|Unrecognized deferred tax assets                                   |  |      | (30 | )% |      | 
|Change in enacted tax rates                                        |  |      | -   |    |      | 
|Tax loss carryforwardsthat expired                                 |  |      | 53  | %  |      | 
|Change in tax regime (flat tax)                                    |  |      | -   |    |      | 
|Other                                                              |  |      | 1   | %  |      | 
|                                                                   |  |      | 13  | %  |      | 





F-35







NOTE 11 - TELEPHONE NETWORK SYSTEMS AND EQUIPMENT - NET:



Telephone network systems and equipment consist of:







|                            |  | Line installation
    cost |         |   | Telecommunications
    network and equipment |  |           | Public
    telephone
    equipment |  |  | Computer
    equipment |   |  | Enginee-
    ring
    equipment |         |   | Radio
    equipment |  |        | Transpor-
    tation
    equipment |  |  | Electronic
    equipment |  |  | Capitalized
    expenses
    due to construction of networks |        |   | Capitalized
    comprehensive
    financing cost |  |         | Leasehold
    improve-
    ments |  |  | Office
    furniture |  |  | Other |         |   | Total | 
|--------------------------- |  | -------------------------- | ------- | - | -------------------------------------------- |  | --------- | ---------------------------------- |  |  | ---------------------- | - |  | ------------------------------- | ------- | - | ------------------- |  | ------ | ---------------------------------- |  |  | ------------------------ |  |  | ------------------------------------------------------------ | ------ | - | ------------------------------------------------ |  | ------- | -------------------------------- |  |  | -------------------- |  |  | ----- | ------- | - | ----- | 
|                            |  |                            |         |   |                                              |  |           |                                    |  |  |                        |   |  |                                 |         |   |                     |  |        |                                    |  |  |                          |  |  |                                                              |        |   |                                                  |  |         |                                  |  |  |                      |  |  |       |         |   |       | 
|Cost                        |  |                            |         |   |                                              |  |           |                                    |  |  |                        |   |  |                                 |         |   |                     |  |        |                                    |  |  |                          |  |  |                                                              |        |   |                                                  |  |         |                                  |  |  |                      |  |  |       |         |   |       | 
|Balance at January 2011     |  |                            | 774,408 |   |                                              |  | 4,083,516 |                                    |  |  | 713,911                |   |  |                                 | 261,698 |   |                     |  | 21,266 |                                    |  |  | 400,488                  |  |  |                                                              | 64,935 |   |                                                  |  | 259,832 |                                  |  |  | 586,720              |  |  |       | 263,090 |   |       | 
|Additions                   |  |                            | 72,220  |   |                                              |  | 222,985   |                                    |  |  | (55,948                | ) |  |                                 | 3,300   |   |                     |  | 855    |                                    |  |  | 3,215                    |  |  |                                                              | 3,936  |   |                                                  |  | 45      |                                  |  |  | 38,908               |  |  |       | 17,650  |   |       | 
|Disposals                   |  |                            | (3,697  | ) |                                              |  | (129,850  | )                                  |  |  | -                      |   |  |                                 | -       |   |                     |  | -      |                                    |  |  | -                        |  |  |                                                              | (8,655 | ) |                                                  |  | -       |                                  |  |  | -                    |  |  |       | (3,608  | ) |       | 
|Balance at 31 December 2011 |  |                            | 842,931 |   |                                              |  | 4,176,651 |                                    |  |  | 657,963                |   |  |                                 | 264,998 |   |                     |  | 22,121 |                                    |  |  | 403,703                  |  |  |                                                              | 60,216 |   |                                                  |  | 259,877 |                                  |  |  | 625,628              |  |  |       | 277,132 |   |       | 
|Additions                   |  |                            | 67,602  |   |                                              |  | 248,797   |                                    |  |  | 48,445                 |   |  |                                 | 3,168   |   |                     |  | 787    |                                    |  |  | 8,415                    |  |  |                                                              | 2,676  |   |                                                  |  | -       |                                  |  |  | 38,468               |  |  |       | 17,024  |   |       | 
|Disposals                   |  |                            | (5,304  | ) |                                              |  | (38,881   | )                                  |  |  | (62,358                | ) |  |                                 | (2,075  | ) |                     |  | -      |                                    |  |  | -                        |  |  |                                                              | (3,401 | ) |                                                  |  | -       |                                  |  |  | -                    |  |  |       | (12,188 | ) |       | 
|Balance at 31 December 2012 |  |                            | 905,229 |   |                                              |  | 4,386,567 |                                    |  |  | 644,050                |   |  |                                 | 266,091 |   |                     |  | 22,908 |                                    |  |  | 412,118                  |  |  |                                                              | 59,491 |   |                                                  |  | 259,877 |                                  |  |  | 664,096              |  |  |       | 281,968 |   |       | 





F-36









|                                                   |  | Line installation
    cost |          |   | Telecommunications
    network and equipment |  |            | Public telephone
    equipment |  |  | Computer equipment |   |  | Enginee- ring
    equipment |          |   | Radio equipment |  |         | Transpor- tation
    equipment |  |  | Electronic equipment |   |  | Capitalized expenses
    due to construction of networks |         |   | Capitalized comprehensive
    financing cost |  |          | Leasehold improve-
    ments |  |  | Office furniture |   |  | Other |          |   | Total | 
|-------------------------------------------------- |  | -------------------------- | -------- | - | -------------------------------------------- |  | ---------- | ------------------------------ |  |  | ------------------ | - |  | --------------------------- | -------- | - | --------------- |  | ------- | ------------------------------ |  |  | -------------------- | - |  | -------------------------------------------------------- | ------- | - | -------------------------------------------- |  | -------- | ---------------------------- |  |  | ---------------- | - |  | ----- | -------- | - | ----- | 
|                                                   |  |                            |          |   |                                              |  |            |                                |  |  |                    |   |  |                             |          |   |                 |  |         |                                |  |  |                      |   |  |                                                          |         |   |                                              |  |          |                              |  |  |                  |   |  |       |          |   |       | 
|Accumulated depreciation and impairment
    losses |  |                            |          |   |                                              |  |            |                                |  |  |                    |   |  |                             |          |   |                 |  |         |                                |  |  |                      |   |  |                                                          |         |   |                                              |  |          |                              |  |  |                  |   |  |       |          |   |       | 
|Depreciation                                       |  |                            | (154,899 | ) |                                              |  | (1,789,623 | )                              |  |  | (241,803           | ) |  |                             | (174,105 | ) |                 |  | (14,437 | )                              |  |  | (173,726             | ) |  |                                                          | (46,516 | ) |                                              |  | (256,854 | )                            |  |  | (240,169         | ) |  |       | (68,762  | ) |       | 
|Impairment                                         |  |                            | (113,963 | ) |                                              |  | (598,474   | )                              |  |  | (105,060           | ) |  |                             | -        |   |                 |  | -       |                                |  |  | (58,936              | ) |  |                                                          | -       |   |                                              |  | -        |                              |  |  | (86,343          | ) |  |       | (38,717  | ) |       | 
|Impairment amortization                            |  |                            | 8,725    |   |                                              |  | 45,818     |                                |  |  | 8,043              |   |  |                             | -        |   |                 |  | -       |                                |  |  | 4,512                |   |  |                                                          | -       |   |                                              |  | -        |                              |  |  | 6,610            |   |  |       | 2,964    |   |       | 
|Balance at January 2011                            |  |                            | (260,137 | ) |                                              |  | (2,342,279 | )                              |  |  | (338,820           | ) |  |                             | (174,105 | ) |                 |  | (14,437 | )                              |  |  | (228,150             | ) |  |                                                          | (46,516 | ) |                                              |  | (256,854 | )                            |  |  | (319,902         | ) |  |       | (104,515 | ) |       | 
|Additions                                          |  |                            | (51,711  | ) |                                              |  | (200,074   | )                              |  |  | (90,046            | ) |  |                             | (34,589  | ) |                 |  | (979    | )                              |  |  | (13,752              | ) |  |                                                          | (9,369  | ) |                                              |  | (173     | )                            |  |  | (60,655          | ) |  |       | (26,632  | ) |       | 
|Disposals                                          |  |                            | 40       |   |                                              |  | 15,415     |                                |  |  | 46,991             |   |  |                             | -        |   |                 |  | -       |                                |  |  | -                    |   |  |                                                          | 8,189   |   |                                              |  | -        |                              |  |  | -                |   |  |       | 303      |   |       | 
|Impairment amortization                            |  |                            | 7,560    |   |                                              |  | 27,017     |                                |  |  | 6,299              |   |  |                             | 5,061    |   |                 |  | 143     |                                |  |  | 2,012                |   |  |                                                          | 173     |   |                                              |  | 25       |                              |  |  | 8,874            |   |  |       | 3,852    |   |       | 
|Balance at 31 December 2011                        |  |                            | (304,248 | ) |                                              |  | (2,499,921 | )                              |  |  | (375,576           | ) |  |                             | (203,633 | ) |                 |  | (15,273 | )                              |  |  | (239,890             | ) |  |                                                          | (47,523 | ) |                                              |  | (257,002 | )                            |  |  | (371,683         | ) |  |       | (126,992 | ) |       | 
|Additions                                          |  |                            | (51,858  | ) |                                              |  | (174,386   | )                              |  |  | (78,102            | ) |  |                             | (29,428  | ) |                 |  | (1,011  | )                              |  |  | (12,179              | ) |  |                                                          | (6,501  | ) |                                              |  | (163     | )                            |  |  | (59,544          | ) |  |       | (26,972  | ) |       | 
|Disposals                                          |  |                            | 14       |   |                                              |  | 21,836     |                                |  |  | 34,977             |   |  |                             | 1,953    |   |                 |  | -       |                                |  |  | -                    |   |  |                                                          | 3,100   |   |                                              |  | -        |                              |  |  | -                |   |  |       | 348      |   |       | 
|Impairment amortization                            |  |                            | 8,218    |   |                                              |  | 24,180     |                                |  |  | 6,836              |   |  |                             | 4,355    |   |                 |  | 160     |                                |  |  | 1,930                |   |  |                                                          | 539     |   |                                              |  | 26       |                              |  |  | 9,438            |   |  |       | 4,220    |   |       | 
|Balance at 31 December
    2012                    |  |                            | (347,874 | ) |                                              |  | (2,628,291 | )                              |  |  | (411,865           | ) |  |                             | (226,753 | ) |                 |  | (16,124 | )                              |  |  | (250,139             | ) |  |                                                          | (50,385 | ) |                                              |  | (257,139 | )                            |  |  | (421,789         | ) |  |       | (149,396 | ) |       | 
|                                                   |  |                            |          |   |                                              |  |            |                                |  |  |                    |   |  |                             |          |   |                 |  |         |                                |  |  |                      |   |  |                                                          |         |   |                                              |  |          |                              |  |  |                  |   |  |       |          |   |       | 
|Carrying amounts                                   |  |                            |          |   |                                              |  |            |                                |  |  |                    |   |  |                             |          |   |                 |  |         |                                |  |  |                      |   |  |                                                          |         |   |                                              |  |          |                              |  |  |                  |   |  |       |          |   |       | 
|At January 2011                                    |  |                            | 514,271  |   |                                              |  | 1,741,237  |                                |  |  | 375,091            |   |  |                             | 87,593   |   |                 |  | 6,829   |                                |  |  | 172,338              |   |  |                                                          | 18,419  |   |                                              |  | 2,978    |                              |  |  | 266,818          |   |  |       | 158,575  |   |       | 
|At 31 December 2011                                |  |                            | 538,683  |   |                                              |  | 1,676,730  |                                |  |  | 282,387            |   |  |                             | 61,365   |   |                 |  | 6,848   |                                |  |  | 163,813              |   |  |                                                          | 12,693  |   |                                              |  | 2,875    |                              |  |  | 253,945          |   |  |       | 150,140  |   |       | 
|At 31 December 2012                                |  |                            | 557,355  |   |                                              |  | 1,758,276  |                                |  |  | 232,185            |   |  |                             | 39,338   |   |                 |  | 6,784   |                                |  |  | 161,979              |   |  |                                                          | 9,106   |   |                                              |  | 2,738    |                              |  |  | 242,307          |   |  |       | 132,572  |   |       | 









F-37







As of December 31, 2012 the estimated cost
remaining to conclude the construction in progress is $139,611 and management expects to conclude them before December 31, 2013.



As of December 31, 2012 the amount of contractual
commitments for the acquisition of Telephone network systems and Equipment is $10,834.



As part of the agreements entered into
with the holders of senior notes issued on December 20, 2006, as mentioned in Note 14, the Company committed all of Maxcom’s
telephone network systems and equipment as collateral in favor of said bond holders.



Although the assets mentioned above have
been encumbered in favor of the senior notes holders, the Company can make use of those assets as long as the requirements and
conditions established in the instruments that govern issuance of the bonds are met.



The Company entered into financial lease
agreements with Autoarrendadora Integral, S. A. de C. V. in pesos for transportation equipment.



The gross amount of fixed assets recognized
under leases that are capitalized is comprised as follows:



|                         |  | December 31, 2012 |       |   | December 31, 2011 |   |       | January 1, 2011 | 
|------------------------ |  | ----------------- | ----- | - | ----------------- | - | ----- | --------------- | 
|Transportation equipment |  | $                 | 2,740 |   |                   | $ | 3,132 |                 | 
|Accumulated depreciation |  |                   | (149  | ) |                   | $ | (317  | )               | 
|                         |  |                   |       |   |                   |   |       |                 | 
|Total                    |  | $                 | 2,591 |   |                   | $ | 2,815 |                 | 



NOTE 12 - INTANGIBLE ASSETS:



Intangible assets are comprised as follows:



|                            |  | Frequency rights |        |  | Software |  |         | Expenses to be
    amortized |  |  | Pipes Rights |  |  | Fiber Rights |        |  | Projects |  |        | Brand Rights |  |  | Total  | 
|--------------------------- |  | ---------------- | ------ |  | -------- |  | ------- | ---------------------------- |  |  | ------------ |  |  | ------------ | ------ |  | -------- |  | ------ | ------------ |  |  | ------ | 
|Cost                        |  |                  |        |  |          |  |         |                              |  |  |              |  |  |              |        |  |          |  |        |              |  |  |        | 
|Balance at January 2011     |  |                  | 94,674 |  |          |  | 376,838 |                              |  |  | 102,548      |  |  |              | 27,365 |  |          |  | 73,279 |              |  |  | 25,454 | 
|Additions                   |  |                  | -      |  |          |  | 11,787  |                              |  |  | 90,000       |  |  |              | -      |  |          |  | -      |              |  |  | -      | 
|Balance at 31 December 2011 |  |                  | 94,674 |  |          |  | 388,625 |                              |  |  | 192,548      |  |  |              | 27,365 |  |          |  | 73,279 |              |  |  | 25,454 | 
|Additions                   |  |                  | -      |  |          |  | 56,036  |                              |  |  | 60,000       |  |  |              | -      |  |          |  | -      |              |  |  | -      | 
|Balance at 31 December 2012 |  |                  | 94,674 |  |          |  | 444,661 |                              |  |  | 252,548      |  |  |              | 27,365 |  |          |  | 73,279 |              |  |  | 25,454 | 



F-38







|Accumulated amortization and impairment
    losses |  |                  |         |   |          |  |          |                              |  |  |              |   |  |              |         |   |          | 
|-------------------------------------------------- |  | ---------------- | ------- | - | -------- |  | -------- | ---------------------------- |  |  | ------------ | - |  | ------------ | ------- | - | -------- | 
|                                                   |  | Frequency rights |         |   | Software |  |          | Expenses to be
    amortized |  |  | Pipes Rights |   |  | Fiber Rights |         |   | Projects | 
|Amortization                                       |  |                  | (61,573 | ) |          |  | (246,515 | )                            |  |  | (102,548     | ) |  |              | (16,830 | ) |          | 
|Impairment (Note 5h)                               |  |                  | (11,799 | ) |          |  | (38,952  | )                            |  |  | -            |   |  |              | -       |   |          | 
|Impairment amortization                            |  |                  | 1,446   |   |          |  | 4,701    |                              |  |  | -            |   |  |              | -       |   |          | 
|Balance at January 2011                            |  |                  | (71,926 | ) |          |  | (280,766 | )                            |  |  | (102,548     | ) |  |              | (16,830 | ) |          | 
|Amortization                                       |  |                  | (3,936  | ) |          |  | (59,510  | )                            |  |  | (90,000      | ) |  |              | (912    | ) |          | 
|Impairment amortization                            |  |                  | 1,283   |   |          |  | 4,962    |                              |  |  | -            |   |  |              | -       |   |          | 
|Balance at 31 December 2011                        |  |                  | (74,579 | ) |          |  | (335,314 | )                            |  |  | (192,548     | ) |  |              | (17,742 | ) |          | 
|Amortization                                       |  |                  | (4,255  | ) |          |  | (46,193  | )                            |  |  | (60,000      | ) |  |              | (912    | ) |          | 
|Impairment amortization                            |  |                  | 1,283   |   |          |  | 5,008    |                              |  |  | -            |   |  |              | -       |   |          | 
|Balance at 31 December 2012                        |  |                  | (77,551 | ) |          |  | (376,499 | )                            |  |  | (252,548     | ) |  |              | (18,654 | ) |          | 
|                                                   |  |                  |         |   |          |  |          |                              |  |  |              |   |  |              |         |   |          | 
|Carrying amounts                                   |  |                  |         |   |          |  |          |                              |  |  |              |   |  |              |         |   |          | 
|At January 2011                                    |  |                  | 22,748  |   |          |  | 96,072   |                              |  |  | -            |   |  |              | 10,535  |   |          | 
|At 31 December 2011                                |  |                  | 20,095  |   |          |  | 53,311   |                              |  |  | -            |   |  |              | 9,623   |   |          | 
|At 31 December 2012                                |  |                  | 17,123  |   |          |  | 68,162   |                              |  |  | -            |   |  |              | 8,711   |   |          | 



NOTE 13 - BALANCES AND TRANSACTIONS WITH RELATED PARTIES:



For the years ended December 31, 2012 and 2011, related party
transactions are analyzed as follows:



|                                                         |  | For
                                                                  the yearendedDecember 31, 2012 |       |  | For
                                                                  the yearendedDecember 31, 2011 |  
|-------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------- | ----- |  | ---------------------------------------------------------------------------------------------------- | -
|                                                         |  |                                                                                                      |       |  |                                                                                                      |  
|Expenses paid to:                                        |  |                                                                                                      |       |  |                                                                                                      |  
|Telecomunicaciones Móviles de México, S. A. de C. V. (2) |  | $                                                                                                    | 3,648 |  |                                                                                                      | $
|BBG Wireless (1)                                         |  |                                                                                                      | 504   |  |                                                                                                      |  
|GS Comunicación (5)                                      |  |                                                                                                      | 2,513 |  |                                                                                                      |  
|Vázquez Eduardo (6)                                      |  |                                                                                                      | 972   |  |                                                                                                      |  
|Vásquez Gabriel Agustín (6)                              |  |                                                                                                      | 806   |  |                                                                                                      |  
|Bank of America, Co. (7)                                 |  |                                                                                                      | 311   |  |                                                                                                      |  
|Autokam Regiomontana, S. A. de C. V. (3)                 |  |                                                                                                      | 80    |  |                                                                                                      |  
|MG Radio (4)                                             |  |                                                                                                      | -     |  |                                                                                                      |  
|Servicios corporativos VAC (8)                           |  |                                                                                                      | 6     |  |                                                                                                      |  
|Total                                                    |  | $                                                                                                    | 8,840 |  |                                                                                                      | $



F-39







Revenues from telephone services collected from related parties.



| | (1) | Corresponds to cluster construction.
| | --- | ------------------------------------

| | (2) | Corresponds to interest payments and a portion of the capital pertaining to a loan to settle Telereunion’s debt with
the Comisión Federal de Electricidad (CFE).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Corresponds to costs related to the purchase of vehicles.
| | --- | ---------------------------------------------------------

| | (4) | Corresponds to advertising services.
| | --- | ------------------------------------

| | (5) | Corresponds to payments regarding marketing consulting services.
| | --- | ----------------------------------------------------------------

| | (6) | Corresponds to lease of sites and offices owned by a relative of a Maxcom shareholder.
| | --- | --------------------------------------------------------------------------------------

| | (7) | Corresponds to expenses related to the debt restructuring and travel expenses related to a risk capital investment fund of
Bank of America (Maxcom shareholder).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (8) | Corresponds to representation expenses.
| | --- | ---------------------------------------



The accounts due to and due from balances
arising from operations with related parties as of December 31, 2012, December 31, 2011 and January 1, 2011were the following:



|                                            |  | December
                                                                                                  31, 2012 |    |  | December
                                                                  31, 2011 |   |    | January
                                                                  1, 2011 | 
|------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------- | -- |  | ----------------------------------------------------------------------------------- | - | -- | --------------------------------------------------------------------------------- | 
|Due from:                                   |  |                                                                                                                     |    |  |                                                                                     |   |    |                                                                                   | 
|                                            |  |                                                                                                                     |    |  |                                                                                     |   |    |                                                                                   | 
|Proa Mensaje y Comunicación, S. A. de C. V. |  | $                                                                                                                   | -  |  |                                                                                     | $ | 11 |                                                                                   | 
|Guijarro de Pablo y Asociados, S. C.        |  |                                                                                                                     | -  |  |                                                                                     |   | 6  |                                                                                   | 
|Shareholder María Elena Aguirre Gómez       |  |                                                                                                                     | -  |  |                                                                                     |   | 1  |                                                                                   | 
|Shareholder Gabriel Vázquez Cartens         |  |                                                                                                                     | 1  |  |                                                                                     |   | 1  |                                                                                   | 
|Difusión Panorámica, S. A. de C. V.         |  |                                                                                                                     | 14 |  |                                                                                     |   | -  |                                                                                   | 
|Porcelanatto, S. A. de C. V.                |  |                                                                                                                     | -  |  |                                                                                     |   | -  |                                                                                   | 
|Shareholder María Guadalupe Aguirre Gómez   |  |                                                                                                                     | -  |  |                                                                                     |   | -  |                                                                                   | 
|Total                                       |  | $                                                                                                                   | 15 |  |                                                                                     | $ | 19 |                                                                                   | 



|                                                         |  | December
                                                                  31, 2012 |        |  | December
                                                                  31, 2011 |   |        | January
                                                                  1, 2011 | 
|-------------------------------------------------------- |  | ----------------------------------------------------------------------------------- | ------ |  | ----------------------------------------------------------------------------------- | - | ------ | --------------------------------------------------------------------------------- | 
|Due to:                                                  |  |                                                                                     |        |  |                                                                                     |   |        |                                                                                   | 
|Telecomunicaciones Móviles de México, S. A. de C. V. (1) |  | $                                                                                   | 25,294 |  |                                                                                     | $ | 26,579 |                                                                                   | 
|BBG Wireless                                             |  |                                                                                     | 6,555  |  |                                                                                     |   | 1,254  |                                                                                   | 
|GS Comunicación, S. A. de C. V.                          |  |                                                                                     | 598    |  |                                                                                     |   | 117    |                                                                                   | 
|Autokam Regiomontana, S. A. de C. V.                     |  |                                                                                     | -      |  |                                                                                     |   | 24     |                                                                                   | 
|Vázquez Eduardo                                          |  |                                                                                     | -      |  |                                                                                     |   | 11     |                                                                                   | 
|Servicios Corporativos VAC                               |  |                                                                                     | -      |  |                                                                                     |   | 11     |                                                                                   | 
|MG Radio                                                 |  |                                                                                     | -      |  |                                                                                     |   | -      |                                                                                   | 
|Total                                                    |  | $                                                                                   | 32,447 |  |                                                                                     | $ | 27,996 |                                                                                   | 



Accounts payable and receivable from related
parties are included within accounts receivable customers and accounts payable, respectively.










| | (1) | On January 5, 2010, Electromecánica de Guadalajara, S. A. de
C. V. gave the rights of the loan to Telecomunicaciones Móviles de Mexico, S. A. de C. V.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------



F-40







|Key management personnel compensation |  |                                      |        |  |                                                                                                                                         |  
|------------------------------------- |  | ------------------------------------ | ------ |  | --------------------------------------------------------------------------------------------------------------------------------------- | -
|                                      |  | For the year ended December 31, 2012 |        |  | For
                                                                                                     the yearendedDecember 31, 2011 |  
|                                      |  |                                      |        |  |                                                                                                                                         |  
|Short-term employee benefits          |  | $                                    | 49,180 |  |                                                                                                                                         | $
|Termination benefits                  |  |                                      | 2,399  |  |                                                                                                                                         |  
|Share-based payments                  |  |                                      | 5,383  |  |                                                                                                                                         |  
|Total                                 |  | $                                    | 56,962 |  |                                                                                                                                         | $



NOTE 14 – SENIOR NOTES:



As of December 31, 2012, December 31, 2011
and January 1, 2011, bonds payable were comprised as follows:



|                                                                                                                                        |  | December 31, 2012 |           |  | December
                                                                                                  31, 2011 |   |           | January
                                                                                                  1, 2011 | 
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- |  | ------------------------------------------------------------------------------------------------------------------- | - | --------- | ----------------------------------------------------------------------------------------------------------------- | 
|                                                                                                                                        |  |                   |           |  |                                                                                                                     |   |           |                                                                                                                   | 
|Long term:                                                                                                                              |  |                   |           |  |                                                                                                                     |   |           |                                                                                                                   | 
|Senior notes maturing on December 15, 2014, bearing interest at a fixed annual rate of 11%, payable semiannually as from June 15, 2007. |  | $                 | 2,282,774 |  |                                                                                                                     | $ | 2,744,287 |                                                                                                                   | 



On December 20, 2006, the Company issued
debt instruments denominated “Bonds” in the international markets in the amount of U.S.$150.0 million in accordance
with Rule 144A and Regulation S, both part of the U.S. Securities Act of 1933. On January 10, 2007 and September 5, 2007, the Company
issued additional Bonds in the amount of U.S.$25.0 million each, on the same global offer and under the same terms as those of
the initial placement.



As of December 31, 2012, December 31, 2011
and January 1, 2011, accrued interest payable on these bonds amounted to $11,920, $14,372 and $12,705, respectively.



As part of the agreements reached with
the Bondholders, the Company agreed to encumber, in order of priority and degree, in favor of said Bondholders, the fixed assets
that comprise the item “Telephone Network System and Equipment”, including, but are not limited to constructions, transportation
equipment and vehicles, computers, information electronic data processing equipment, telecommunications and office furniture and
equipment. The guarantee was perfected on February 13, 2007 through a voluntary mortgage set up in order of priority and degree.



Even though the above-mentioned assets
have been pledged to the Bondholders, the Company can make use of said assets, provided the requirements and conditions established
in the instruments that govern the issuance of the Bonds are met.



The main characteristics of this Bond issue
are that it: a) represents preferential liabilities of the Company (subject to the mortgage mentioned in the paragraphs above);
b) “pari passu” (equal rights and conditions like any other similar debt entered into by the issuer) on payment rights
on all current company principal debt; c) is considered preferential debt in regards to any future principal debt of the Company;
and d) is unconditionally guaranteed by the shares of all the Company’s subsidiaries, except by the shares of Grupo Telereunion
companies, which were pledged beginning in 2009, and d) is subject to registration before the Securities and Exchange Commission
(SEC), in accordance with the Registration Rights Agreement, this record was duly completed on November 19, 2007, according to
the values’ exchange described below.



F-41







On November 19, 2007 the bonds exchange
program was completed for an approximate amount of 200.0 million dollars and registered with the SEC with the same characteristics
of maturity, interest rate and almost all other characteristics.



The aforementioned Bonds contain positive
and negative covenants, which have been duly complied with as of December 31, 2012, December 31, 2011 and January 1, 2011.



Interest paid abroad is subject to income
tax withholding at a rate of 4.9%, payable by the Bondholder and interest is payable net. However, the Company assumed
the obligation to pay interest free of any charge or tax burden to the Bondholders, absorbing the cost of the retention of withholding
taxes.



As of December 31, 2012 the Company has
repurchased outstanding senior notes for a total amount of U.S. $15.4 million (fair value). The difference between the carrying
amount (U.S.$22.9 million) and the purchase price resulted in a gain of U.S.$7.5 million ($97,845 pesos) which was recognized in
the consolidated statement of comprehensive loss.





NOTE 15 - FOREIGN CURRENCY POSITION:



Figures in this note represent thousands of US dollars.



The Company’s foreign-currency position (exclusive of
the currency swaps) was as follows:



|                                                         |  | December31,
    2012 |          |   | December31,
    2011 |   |          | January 1,2011 | 
|-------------------------------------------------------- |  | -------------------- | -------- | - | -------------------- | - | -------- | -------------- | 
|Assets                                                   |  |                      |          |   |                      |   |          |                | 
|Short-term                                               |  | $                    | 5,558    |   |                      | $ | 37,641   |                | 
|Long-term                                                |  |                      | 2,470    |   |                      |   | 3,895    |                | 
|                                                         |  |                      | 8,028    |   |                      |   | 41,536   |                | 
|Liabilities                                              |  |                      |          |   |                      |   |          |                | 
|Short-term                                               |  |                      | 15,700   |   |                      |   | 12,123   |                | 
|Long-term                                                |  |                      | 176,107  |   |                      |   | 198,511  |                | 
|                                                         |  |                      | 191,807  |   |                      |   | 210,634  |                | 
|                                                         |  |                      |          |   |                      |   |          |                | 
|Net (liabilities) - in dollars                           |  |                      | (183,779 | ) |                      | $ | (169,098 | )              | 
|Exchange rate at end of the year ($1 to the 1.00 dollar) |  | $                    | 13.01    |   |                      | $ | 13.98    |                | 



NOTE 16 - DERIVATIVE FINANCIAL INSTRUMENTS:



At December 31, 2012 and 2011 the Company
had four swaps with Bank Morgan Stanley, without receiving or settling any amount for such transactions. See Note 21. For all the
active financial instruments (swaps), the Company will pay the computed interests of the notional settled in Mexican pesos on a
semiannual basis, and will receive an interest income generated from the notional settled in dollars. As of December 31, 2012 and
2011 the swaps totaled $32.1 and $81.6 million, respectively, which was composed of the following derivatives:



F-42







Cross currency swaps:



|Counterparty            |  | Received Leg        |  | Payment Leg                         |  | Maturity          |  | Loss for the year ended December 31, 2012 |         |   | Gain for the year ended December 31, 2011 | 
|----------------------- |  | ------------------- |  | ----------------------------------- |  | ----------------- |  | ----------------------------------------- | ------- | - | ----------------------------------------- | 
|Bank Morgan Stanley SAS |  | 37,500 USD @11% S/A |  | (478,125) MXN @ TIIE 28 + 4.57% S/A |  | December 15, 2014 |  | $                                         | (9,087  | ) |                                           | 
|Bank Morgan Stanley SAS |  | 37,500 USD @11% S/A |  | (478,125) MXN @  12.75% S/A         |  | December 15, 2014 |  |                                           | (8,134  | ) |                                           | 
|Bank Morgan Stanley SAS |  | 37,500 USD @11% S/A |  | (474,375) MXN@ TIIE 28 + 4.85% S/A  |  | December 15, 2014 |  |                                           | (15,370 | ) |                                           | 
|Bank Morgan Stanley SAS |  | 37,500 USD @11% S/A |  | (474,375)MXN @  12.91% S/A          |  | December 15, 2014 |  |                                           | (16,909 | ) |                                           | 



For accounting purposes, these derivative
instruments, although intended for hedging purposes from an economic perspective, have been designated as trading instruments as
they do not comply with all the requirements to qualify for hedge accounting. Changes in the fair value of these derivative instruments
are recognized in the statement of operations for the year in which such changes occur, under financing cost.



NOTE 17 - LABOR OBLIGATIONS UPON RETIREMENT AND PERSONNEL
EXPENSES:



As of December 31, 2012, December 31, 2011
and January 1, 2011 the Company has direct benefits payable for absences (non-cumulative) amounting to $698, $878 and $593, respectively.



The Company has obligations and costs of
seniority premiums for employees entitled to receive them and are recognized based on actuarial studies prepared by an independent
third party specialist.



|                           |  | For the yearendedDecember 31,2012 |       |   | For the yearendedDecember 31,2011 | 
|-------------------------- |  | --------------------------------- | ----- | - | --------------------------------- | 
|Net cost for the period:   |  |                                   |       |   |                                   | 
|Labor cost                 |  | $                                 | 1,485 |   |                                   | 
|Financial cost             |  |                                   | 173   |   |                                   | 
|Actuarial (gain) loss, net |  |                                   | 1,042 |   |                                   | 
|Settlement effect          |  |                                   | (987  | ) |                                   | 
|                           |  |                                   |       |   |                                   | 
|Net cost for the period    |  | $                                 | 1,713 |   |                                   | 



F-43







The following is the determination of
liabilities for the benefits of the plans:



|                                                |  | Retirement |      
|----------------------------------------------- |  | ---------- | -----
|                                                |  | Benefits   |      
|                                                |  | Seniority  |      
|                                                |  | Premium    |      
|Defined benefit obligation:                     |  |            |      
|Defined benefit obligation at January 1, 2011   |  | $          | 1,691
|Current service cost                            |  |            | 529  
|Financial cost                                  |  |            | 544  
|Actuarial gains and losses                      |  |            | (167 
|Effects of settlement                           |  |            | (112 
|                                                |  |            |      
|Defined benefit obligation at December 31, 2011 |  |            | 2,485
|                                                |  |            |      
|Current service cost                            |  |            | 1,485
|Financial cost                                  |  |            | 173  
|Actuarial gains and losses                      |  |            | 1,042
|Effects of settlement                           |  |            | (987 
|                                                |  |            |      
|Defined benefit obligation at December 31, 2012 |  | $          | 4,198



|                                                                             |  | Benefits         |           
|---------------------------------------------------------------------------- |  | ---------------- | ----------
|                                                                             |  | December 31,2012 |           
|                                                                             |  |                  |           
|Discount rate reflecting the value of the current obligations                |  |                  | 6.50      
|Compensation increase rate                                                   |  |                  | 5.00      
|Expected nominal rate on return of assets                                    |  |                  | N/A       
|Employee Remnant Average Labor Life (applicable to benefits upon retirement) |  |                  | 27.8 years



PERSONNEL EXPENSES



For the year ended December 31, 2012 the
Company incurred in personnel expenses of $429.4 million compared to $454.2 million for the year ended December 31, 2011.



NOTE 18 - STOCKHOLDERS’ EQUITY:



Capital stock structure –



Under the Mexican Federal Telecommunications
Law and the Foreign Investment Law, no more than 49% of the voting capital stock of a Mexican corporation holding a concession
to provide local and long-distance telecommunications services may be held by foreigners.



On April 11, 2002, the Company obtained
authorization from the Foreign Investment Bureau (“Dirección General de Inversión Extranjera”)to
increase its ability to issue limited voting shares up to 95% of its total capital stock. This authorization was endorsed on September
28, 2007, at the Company’s public offering.



F-44







As of December 31, 2012, December 31, 2011,
and January 1, 2011 the shares representative of the Company’s capital stock are nominative, with no par value and were comprised
as shown below:



|Series and Class of Shares             |  | December
    31,2012 |             |  | December
    31,2011 |  |             | January
    1,2011 | 
|-------------------------------------- |  | -------------------- | ----------- |  | -------------------- |  | ----------- | ------------------ | 
|Issued and outstanding:                |  |                      |             |  |                      |  |             |                    | 
|Series “A” Class I (fixed portion)     |  |                      | 1,528,827   |  |                      |  | 1,528,827   |                    | 
|Series “A” Class II (variable portion) |  |                      | 788,290,002 |  |                      |  | 788,290,002 |                    | 
|                                       |  |                      |             |  |                      |  |             |                    | 
|Subtotal                               |  |                      | 789,818,829 |  |                      |  | 789,818,829 |                    | 



Authorized shares not outstanding:

(treasury shares)



|Series “A”              |  |  | 25,800,000  |  |  |  | 11,000,000  |  |  |  | 11,000,000  | 
|----------------------- |  |  | ----------- |  |  |  | ----------- |  |  |  | ----------- | 
|                        |  |  |             |  |  |  |             |  |  |  |             | 
|Total authorized shares |  |  | 815,618,829 |  |  |  | 800,818,829 |  |  |  | 800,818,829 | 



In the event of a reduction to the capital
stock or to the share subscription premium any surplus of the amount reimbursed over the balances of the accounts of contributed
capital, a tax equivalent to 30% shall be incurred, when paid in the future. The tax incurred shall be paid by the Company and
may be credited against the Income Tax for the fiscal year, or the Income Tax for the two immediately following fiscal years.



As of December 31, 2012, December 31, 2011
and January 1, 2011, the Company’s capital stock was comprised as follows:



|              |  | December31, 2012 |           |  | December31, 2011 |   |           | January
    1,2011 | 
|------------- |  | ---------------- | --------- |  | ---------------- | - | --------- | ------------------ | 
|Capital stock |  | $                | 4,814,428 |  |                  | $ | 4,814,428 |                    | 



On April 20, 2012, by means of resolutions
adopted by the General Ordinary Shareholders Meetings, the shareholders approved the reclassification of the additional paid in
capital for the amount of $817,054 million to the accumulated losses of the Company and the corresponding decrease of the accumulative
losses.



Stockholders restrictions –



Five percent of net income for the year
must be appropriated to the statutory reserve, until it reaches one-fifth of capital stock. As of December 31, 2012, the statutory
reserve has not reached the required amount.



No dividends may be paid while the Company
has not received the related amounts as dividends from subsidiary companies.



NOTE 19 - STOCK BASED COMPENSATION:



On September, 2011, by means of resolutions
adopted by the General Extraordinary and Ordinary Shareholders Meetings, the shareholders ratified the Executive Incentive Program.
In this case a portion of the payments is awarded through shares, as described below:



| | · | Employee Incentive Program.
| | - | ---------------------------



F-45











| | a. | The yearly incentive goal, which may be given to the Company’s officers and employees who
are eligible under the scope of the Executive Incentive Program, is to reward management for reach the budgeted EBITDA for 2011,
2012 and 2013through a variable incentive program short-term (annual) and medium term(three-year).
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | The minimum requirement for the incentives to be awarded is 85% of budgeted EBITDA for the company.
A lower EBITDA generated no beneficiaries entitled to receive payment of the incentive plan.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



It is also necessary to maintain
minimum cash and a ratio of EBITDA to Debt at the end of each year. Lower values for the minimum amount of cash or debt ratio higher
do not generate bonus payments.



| | c. | The amount of the yearly incentive is based on the monthly salary multiplied by a predefined factor.
| | -- | ----------------------------------------------------------------------------------------------------



| | d. | The yearly incentive is divided into three parts:
| | -- | -------------------------------------------------



| | i. | One part will be awarded through cash.
| | -- | --------------------------------------



| | ii. | One part will be awarded through stock options in order to receive American Depositary Receipts
(ADRs), Ordinary Certification Participates (CPOs) or any other instrument whose underlying values represent Maxcom’s capital
stock (exercise price $0.01).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii. | One part will be awarded through stock options in order to receive ADR’s, CPO’s or
any other instrument whose underlying values represent Maxcom’s capital stock (exercise price average of the last 30 days).
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On January, 2010, by means of resolutions
adopted by the General Extraordinary and Ordinary Shareholders Meetings, the shareholders the compensation awarded to counselors
and members of the Company’s different committees. In this case a portion of the payments is awarded through shares, as described
below:



| | · | Compensation for Directors and Committee
members.
| | - | -------------------------------------------------



| | a. | Directors and Committee members will receive each year options to purchase up to $120 in the form
of CPOs, with the exception of the Chairman of the Board who will receive each year options to purchase up to $240 in the form
of CPOs.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | b. | The Chairman of the Committee will receive each year options to purchase up to $180 in the form
of CPOs.
| | -- | --------------------------------------------------------------------------------------------------------



The fair value of options for services
rendered was determined using a binomial valuation model applying the Black & Scholes method.



The cost for the years ended December 31,
2012 and 2011, respectively was of $3,592, and $3,919. The compensation cost of the stock option for counselors and options for
executives are recognized in shorter periods, because it corresponds to the payment of emoluments and performance bonds and its
“fair value” fluctuates between 0.15 dollars and 0.38 dollars.



The breakdown of the options granted and
their vesting periods for the year ended December 31, 2012 are described below:



F-46







|                          |  |               |            |   | Options to     |   |            |       | 
|------------------------- |  | ------------- | ---------- | - | -------------- | - | ---------- | ----- | 
|                          |  | New           |            |   | counselors and |   |            |       | 
|                          |  | option plans  |            |   | executive      |   |            |       | 
|                          |  | for employees |            |   | plans          |   |            | Total | 
|                          |  |               |            |   |                |   |            |       | 
|Options granted 2011      |  | $             | 3,056,460  |   |                | $ | 9,520,524  |       | 
|Granted during the year   |  |               | 15,009,315 |   |                |   | 2,900,400  |       | 
|Options exercised in year |  |               | (1,886,400 | ) |                |   | -          |       | 
|Options cancelled         |  |               | (2,021,760 | ) |                |   | (5,627,961 | )     | 
|                          |  |               |            |   |                |   |            |       | 
|Total options granted     |  |               | 14,157,615 |   |                |   | 6,792,963  |       | 



|                   |  | For the year ended |             |   | For the year ended |  
|------------------ |  | ------------------ | ----------- | - | ------------------ | -
|                   |  | December 31, 2012  |             |   | December 31, 2011  |  
|                   |  |                    |             |   |                    |  
|Options authorized |  | $                  | 38,830,459  |   |                    | $
|Options granted    |  |                    | (20,950,578 | ) |                    |  
|                   |  |                    |             |   |                    |  
|Options available  |  | $                  | 17,879,881  |   |                    | $



As of December 31, 2012 and 2011 changes
in additional paid-in capital were as follows:



|                       |  | For
    the year endedDecember 31, 2012 |       |  | For
    the  year endedDecember 31, 2011 |  
|---------------------- |  | --------------------------------------- | ----- |  | ---------------------------------------- | -
|                       |  |                                         |       |  |                                          |  
|Stock option plan cost |  | $                                       | 3,592 |  |                                          | $



NOTE 20 - COMMITMENTS AND CONTINGENT LIABILITIES:



As of December 2012, the Company has the
following commitments:



| | a. | Operating lease agreements:
| | -- | ---------------------------



The Company maintains operating leases
on buildings, sites, poles and office equipment. The Company recorded leasing expenses of $82,898 and $81,109 for the years ended
December 2012 and 2011, respectively.



The schedule for estimated future minimum
operating lease payments is as follows:



|2013 |  | $ | 84,801 | 
|---- |  | - | ------ | 
|2014 |  |   | 51,338 | 
|2015 |  |   | 51,158 | 
|2016 |  |   | 52,298 | 
|2017 |  |   | 54,929 | 



F-47







| | b. | Lease agreement for the building currently housing the Company’s corporate offices.
| | -- | -----------------------------------------------------------------------------------



On September 1, 2005, the Company renewed
its corporate lease agreement with maturity date on December 31, 2012. The surface leased is 7,922 square meters. The Company recorded
a lease expense of $40,866 and $38,300 for the years ended December 31, 2012 and 2011, respectively.



The schedule for estimated future minimum
lease agreement is as follows:



|2013 |  | $ | 42,925 | 
|---- |  | - | ------ | 
|2014 |  |   | 1,314  | 
|2015 |  |   | 1,164  | 
|2016 |  |   | 1,115  | 
|2017 |  |   | 743    | 



| | c. | Geographic expansion commitment:
| | -- | --------------------------------



The agreement amending the national concession
agreement to install and operate a public telecommunications network in Mexico, entered into on December 2, 2004, sets forth a
capacity installation program to handle a certain number of lines by the end of 2006, and sets forth a geographic expansion commitment
up until 2014.



In order for the concession to remain in
effect, the Company is required to comply with the capacity installation and geographic expansion commitment discussed above, among
other conditions.



As of the date of issuance of the financial
statements, said commitment was fully covered, with no future commitments remaining.



| | d. | Commitment related to frequency rights:
| | -- | ---------------------------------------



As of December 31, 2012, the Company complied
with its obligation to submit to the SCT the renewal of the surety bonds for the fiscal year 2011, as per the commitments and obligations
set forth in the concessions.



| | e. | Commitment pertaining to the sale of capacity:
| | -- | ----------------------------------------------



In October 2003, the Company entered into
an agreement for the sale of optical fiber capacity with another telephone carrier in the amount of $22.5 million, which was recognized
at the time of the sale as a prepaid charge of $13.5 million to render this service; the term of this agreement is 13 years. As
of December 31, 2012, deferred revenue amounted to $6.9 million.



In November 2007, the Company entered into
an optical fiber capacity sale agreement with Grupo de Telecomunicaciones Mexicano in the amount of $13.4 million, where the Company
recorded $7.6 million as deferred income generated from the services pending to be provided. This service started in October 2008.
The termination date for this agreement is due in 5 years. As of December 31, 2012 and 2011, the balance pending to be incurred
is $2 and 4.7 million, respectively.



In December 2008, the Company entered into
an optical fiber capacity sale agreement with Megacable in the amount of $35.3 million, where the Company recorded $25.6 million
as deferred income generated from the services pending to be provided. The termination date for this agreement is due in 10 years.
As of December 31, 2012 and 2011, the balance pending to be incurred is $16.5 and $18.5 million, respectively.



In September 2009, the Company entered
into an optical of fiber capacity sale agreement with Cablevision in the amount of $8.6 million, where the Company recorded $6.3
million as deferred income generated from the services pending to be provided. The termination date for this agreement is due in
10 years. As of December 31, 2012 and 2011, the balance pending to be incurred is $4.2 and $4.9 million, respectively.



F-48







| | f. | Comisión Federal de Electricidad (CFE):
| | -- | ---------------------------------------



On June 23, 1999, the Telereunion entered
in a lease infrastructure agreement with the CFE which due date will be within 30 years, in the amount approximate amount of $38.7
million.



After a lawsuit sentence, on January 9,
2007, Telereunion and CFE agreed that Telereunion should pay the approximate amount of $39.7 million that was originated from the
30 years lease infrastructure agreement that should have been paid in advance.



The lawsuit sentence pointed out that the
amount owned to CFE plus actualization charges should have been paid on November 29, 2008, even though the computed interest should
have been paid in 4 semiannual installments since November 29, 2007. This amount was paid by Telereunion on November 27, 2008.



Within the acquisition agreements between
Telereunion, and Grupo VAC, this last mentioned agreed to grant a loan to Telereunion in order to pay the amount owned to CFE.
This loan will be paid to Grupo VAC in monthly installments not greater than $110, from the effective date of the agreement and
throughout the next 30 years. The loan will bear an interest rate per annum equal to TIIE plus 300 basis points.



The account payable to Grupo VAC as of
December 31, 2012 and 2011, in regards of the short term portion related to the abovementioned loan is included within the “Accounts
payable” caption totaled $1,276 and $1,417, respectively; while the non-current portion is included within the “Long-term
Other account payable” caption totaled $25,203 and $25,579, respectively.



| | g. | The Company is involved in a number of lawsuits and claims arising in the normal course of business. 
It is expected that the final outcome of these matters will not have significant adverse effects on the Company’s financial
position and results of operations.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | h. | In accordance with Mexican tax law, the tax authorities are entitled to examine transactions carried
out during the five years prior to the most recent income tax return filed.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | i. | In accordance with the Income Tax Law, companies carrying out transactions with related parties
are subject to certain requirements as to the determination of prices, which should be similar to those that would be used in arm’s-length
transactions.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | j. | Should the tax authorities examine the transactions and reject the related-party prices, they could
assess additional taxes plus the related inflation adjustment and interest, in addition to penalties of up to 100% of the omitted
taxes.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | k. | The tax authorities are conducting a direct examination of certain Company operations.  At
December 31st, 2012, this examination is still in progress.  Management of the Company and their legal counsel do not anticipate
that this examination will result in significant additional assessments.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



NOTE 21 – SUBSEQUENT EVENTS:



In recent quarters, the Company
has experienced recurring losses, declines in revenues, cash flows, and cash balances, which may affect its liquidity if
those trends are not reversed (see Note 3 - liquidity).



To address the
aforementioned concerns in its financial condition, on December 4, 2012, the Company entered into a Recapitalization
Agreement with Ventura Capital Privado, S.A. de C.V. (“Ventura Capital”) acting on behalf of a group of
investors. During 2013, Maxcom also agreed to commence to exchange its outstanding 11% Senior Notes due 2014 for its Step-Up
Senior Notes due 2020 (“Exchange Offer”).



Since the conditions for
the consummation of the Exchange Offer and the consent solicitation were not satisfied or waived, including the minimum
tender condition, the Exchange Offer and Recapitalization Agreement were not consummated. As a result, the Company is
evaluating the commencement of a voluntary restructuring under Chapter 11 of the United States Bankruptcy Code.



On February 8, 2013, the
Company cancelled the asset position of its derivative financial instruments. As a result, the Company received US$1.8
million from the counterparty.



As of April 30, 2013, Board of
Directors, Company officers and some employees of the Company exercised 16,187,715 shares (5,395,905 CPO’s) of the
Stock Option Plan. After this exercised the total outstanding shares were of 806,006,544.



F-49











NOTE 22– EXPLANATION TO TRANSITION
TO IFRS:



As stated in Note 4(a), these are the Company’s
first consolidated financial statements prepared in accordance with IFRS.



The accounting policies set out in Note
5 were applied in preparing the financial statements for the year ended December 31, 2012, the comparative information presented
in these financial statements for the years ended December 31, 2012 and 2011, and in the preparation of an opening IFRS statement
of financial position at 1 January 2011 (the Company’s date of transition).



In preparing its opening IFRS statement
of financial position, the Company has adjusted amounts reported previously in financial statements prepared in accordance with
Mexican Financial Reporting Standard (MFRS) (its previous GAAP). An explanation of how the transition from previous GAAP to IFRS
has affected the Company’s financial position, financial performance and cash flows is set out in the following tables and
the notes that accompany the tables.



At the transition date, the Company applied
the following mandatory exceptions to retrospective application of IFRS, as required by IFRS 1. Other mandatory exceptions were
not applicable.



| | a. | Accounting estimates - The accounting estimates made under MFRS as of January 1,
2011, are consistent with estimates made under IFRS and therefore were not adjusted retrospectively.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company has also selected the following
voluntary exemptions for retrospective application of IFRS, as permitted by IFRS 1:



| | a. | Business Combinations –The Company applied the business combination exemption
under IFRS 1. Therefore, IFRS 3, Business Combinations, was not retrospectively applied to business combinations that occurred
before January 1, 2011.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | Deemed cost - The Company applied the deemed cost exemption under IFRS 1. Therefore,
the value of certain items of telephone network systems and equipment is equal to depreciated cost under IFRS, as adjusted to reflect
revaluations recorded under MFRS.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | Employee benefits–The Company applied the employee benefits exemption. Therefore,
it recognized all of the accumulated actuarial gains and losses at the transition.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | Borrowing costs -The Company applied the borrowing cost exemption, for which reason
it did not modify amounts it has capitalized with respect to borrowing costs under MFRS, and instead applied the provisions of
IAS 23, Borrowing Costs, prospectively beginning with its transition date.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e. | Share based payments –The Company did not apply IFRS 2,Share based payment,
to equity instruments in share-based payment transactions that were granted on or before 7 November 2002, nor has it been applied
to equity instruments granted after 7 November 2002 that vested before 1 January 2011. Further, the standard has not been applied
to awards that were modified before 1 January 2011.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-50







There were no material adjustments to the
statement of cash flows.



Reconciliation of equity



|                                                             |  | Notes |  | January 1, 2011 Previous GAAP |            |   | Effect of transition to
    IFRS |  |          | January 1, 2011 IFRS |  |  | December 31, 2011 Previous
    GAAP |   |  | Effect of transition to
    IFRS |            |   | December 31, 2011 IFRS | 
|------------------------------------------------------------ |  | ----- |  | ----------------------------- | ---------- | - | -------------------------------- |  | -------- | -------------------- |  |  | ----------------------------------- | - |  | -------------------------------- | ---------- | - | ---------------------- | 
|                                                             |  |       |  | January
    1, 2011           |            |   | December
    31, 2011            | 
|Assets                                                       |  |       |  |                               |            |   |                                  |  |          |                      |  |  |                                     |   |  |                                  |            |   |                        | 
|Current assets:                                              |  |       |  |                               |            |   |                                  |  |          |                      |  |  |                                     |   |  |                                  |            |   |                        | 
|Cash and cash equivalents(note 8)                            |  |       |  |                               | 375,224    |   |                                  |  | -        |                      |  |  | 375,224                             |   |  |                                  | 396,580    |   |                        | 
|Derivative financial instrument (note 16)                    |  | b.    |  |                               | 3          |   |                                  |  | (3       | )                    |  |  | -                                   |   |  |                                  | 29,522     |   |                        | 
|Accounts receivable— net(note 9)                             |  |       |  |                               | 714,661    |   |                                  |  | -        |                      |  |  | 714,661                             |   |  |                                  | 654,740    |   |                        | 
|Value added tax recoverable                                  |  |       |  |                               | 166,465    |   |                                  |  | -        |                      |  |  | 166,465                             |   |  |                                  | 88,554     |   |                        | 
|Other sundry debtors                                         |  |       |  |                               | 67,719     |   |                                  |  | -        |                      |  |  | 67,719                              |   |  |                                  | 46,236     |   |                        | 
|Inventory — net                                              |  |       |  |                               | 25,678     |   |                                  |  | -        |                      |  |  | 25,678                              |   |  |                                  | 8,895      |   |                        | 
|Prepaid expenses —
    net                                   |  |       |  |                               | 31,647     |   |                                  |  | -        |                      |  |  | 31,647                              |   |  |                                  | 25,109     |   |                        | 
|Total current assets                                         |  |       |  |                               | 1,381,397  |   |                                  |  | (3       | )                    |  |  | 1,381,394                           |   |  |                                  | 1,249,636  |   |                        | 
|Non-current assets:                                          |  |       |  |                               |            |   |                                  |  |          |                      |  |  |                                     |   |  |                                  |            |   |                        | 
|Telephone network systems and equip – net
    (note 11)      |  | e.f.  |  |                               | 4,391,994  |   |                                  |  | (160,156 | )                    |  |  | 4,231,838                           |   |  |                                  | 4,113,873  |   |                        | 
|Intangible assets – net (note 12)                            |  | c.    |  |                               | 260,494    |   |                                  |  | (84,709  | )                    |  |  | 175,785                             |   |  |                                  | 196,480    |   |                        | 
|Deferred income taxes — net(note 10)                         |  | h.    |  |                               | -          |   |                                  |  | -        |                      |  |  | -                                   |   |  |                                  | 19,612     |   |                        | 
|Prepaid expenses — net                                       |  |       |  |                               | 6,881      |   |                                  |  | -        |                      |  |  | 6,881                               |   |  |                                  | -          |   |                        | 
|Guaranty deposits                                            |  |       |  |                               | 7,526      |   |                                  |  | -        |                      |  |  | 7,526                               |   |  |                                  | 7,709      |   |                        | 
|Derivative financial instruments (note 16)                   |  | g.    |  |                               | -          |   |                                  |  | -        |                      |  |  | -                                   |   |  |                                  | 54,459     |   |                        | 
|Other assets                                                 |  |       |  |                               | 2,151      |   |                                  |  | -        |                      |  |  | 2,151                               |   |  |                                  | 2,151      |   |                        | 
|Total
    long lived assets                                  |  |       |  |                               | 4,669,046  |   |                                  |  | (244,865 | )                    |  |  | 4,424,181                           |   |  |                                  | 4,394,284  |   |                        | 
|Total
    assets                                             |  |       |  |                               | 6,050,443  |   |                                  |  | (244,868 | )                    |  |  | 5,805,575                           |   |  |                                  | 5,643,920  |   |                        | 
|Liabilities and Shareholders’ Equity                         |  |       |  |                               |            |   |                                  |  |          |                      |  |  |                                     |   |  |                                  |            |   |                        | 
|Current liabilities:                                         |  |       |  |                               |            |   |                                  |  |          |                      |  |  |                                     |   |  |                                  |            |   |                        | 
|Accounts payable                                             |  |       |  |                               | 346,204    |   |                                  |  | -        |                      |  |  | 346,204                             |   |  |                                  | 215,773    |   |                        | 
|Accruals                                                     |  |       |  |                               | 33,724     |   |                                  |  | -        |                      |  |  | 33,724                              |   |  |                                  | 19,701     |   |                        | 
|Current installments of obligations under capital
    leases |  |       |  |                               | 1,693      |   |                                  |  | -        |                      |  |  | 1,693                               |   |  |                                  | 2,975      |   |                        | 
|Customer deposits                                            |  |       |  |                               | 2,158      |   |                                  |  | -        |                      |  |  | 2,158                               |   |  |                                  | 2,051      |   |                        | 
|Other taxes payable                                          |  |       |  |                               | 54,127     |   |                                  |  | -        |                      |  |  | 54,127                              |   |  |                                  | 34,626     |   |                        | 
|Accrued interests  (note
    14)                             |  |       |  |                               | 12,705     |   |                                  |  | -        |                      |  |  | 12,705                              |   |  |                                  | 14,372     |   |                        | 
|Total current liabilities                                    |  |       |  |                               | 450,611    |   |                                  |  |          |                      |  |  | 450,611                             |   |  |                                  | 289,498    |   |                        | 
|Non-current liabilities:                                     |  |       |  |                               |            |   |                                  |  |          |                      |  |  |                                     |   |  |                                  |            |   |                        | 
|Derivative financial instruments (note 16)                   |  | g.    |  |                               | 5,137      |   |                                  |  | 8,397    |                      |  |  | 13,534                              |   |  |                                  | -          |   |                        | 
|Senior notes (note 14)                                       |  | c.    |  |                               | 2,471,420  |   |                                  |  | (38,538  | )                    |  |  | 2,432,882                           |   |  |                                  | 2,774,761  |   |                        | 
|Installments of obligations under capital leases             |  |       |  |                               | 4,920      |   |                                  |  | -        |                      |  |  | 4,920                               |   |  |                                  | 6,141      |   |                        | 
|Other accounts payable                                       |  | e.    |  |                               | 91,780     |   |                                  |  | (43,408  | )                    |  |  | 48,372                              |   |  |                                  | 39,650     |   |                        | 
|Labor obligations upon retirement (note 17)                  |  | d.    |  |                               | 27,294     |   |                                  |  | (25,603  | )                    |  |  | 1,691                               |   |  |                                  | 35,565     |   |                        | 
|Other long term liabilities                                  |  |       |  |                               |            |   |                                  |  | 34,351   |                      |  |  | 34,351                              |   |  |                                  | 39,252     |   |                        | 
|Deferred income taxes –
    net(note 10)                     |  | h.    |  |                               | 8,755      |   |                                  |  | 4,480    |                      |  |  | 13,235                              |   |  |                                  |            |   |                        | 
|Total
    long-term liabilities                              |  |       |  |                               | 2,609,306  |   |                                  |  | (60,321  | )                    |  |  | 2,548,985                           |   |  |                                  | 2,895,369  |   |                        | 
|Total
    liabilities                                        |  |       |  |                               | 3,059,917  |   |                                  |  | (60,321  | )                    |  |  | 2,999,596                           |   |  |                                  | 3,184,867  |   |                        | 
|Shareholders’
    equity (notes18 and 19)                    |  |       |  |                               |            |   |                                  |  |          |                      |  |  |                                     |   |  |                                  |            |   |                        | 
|Capital stock                                                |  | a.    |  |                               | 5,410,244  |   |                                  |  | (595,816 | )                    |  |  | 4,814,428                           |   |  |                                  | 5,410,244  |   |                        | 
|Additional paid-in capital                                   |  |       |  |                               | 813,135    |   |                                  |  | -        |                      |  |  | 813,135                             |   |  |                                  | 817,054    |   |                        | 
|Accumulated losses                                           |  | i.    |  |                               | (3,231,791 | ) |                                  |  | 411,269  |                      |  |  | (2,820,522                          | ) |  |                                  | (3,768,245 | ) |                        | 
|Repurchase of shares                                         |  |       |  |                               | (1,062     | ) |                                  |  | -        |                      |  |  | (1,062                              | ) |  |                                  | -          |   |                        | 
|Total
    shareholders’ equity                               |  |       |  |                               | 2,990,526  |   |                                  |  | (184,547 | )                    |  |  | 2,805,979                           |   |  |                                  | 2,459,053  |   |                        | 
|Total
    liabilities and shareholders’ equity               |  |       |  |                               | 6,050,443  |   |                                  |  | (244,868 | )                    |  |  | 5,805,575                           |   |  |                                  | 5,643,920  |   |                        | 



F-51







Reconciliation of comprehensive income for the year ended
December 31, 2011.



|                                             |  | Notes |  | Previous GAAP     |           |   | Effects of transition to IFRS |  |         | IFRS | 
|-------------------------------------------- |  | ----- |  | ----------------- | --------- | - | ----------------------------- |  | ------- | ---- | 
|                                             |  |       |  | December 31, 2011 |          
|                                             |  |       |  |                   |           |   |                               |  |         |      | 
|Net revenues (note 7)                        |  |       |  |                   | 2,375,941 |   |                               |  |         |      | 
|                                             |  |       |  |                   |           |   |                               |  |         |      | 
|Network operating costs                      |  |       |  |                   | 770,257   |   |                               |  |         |      | 
|Selling, general and administrative expenses |  | d.    |  |                   | 803,019   |   |                               |  | (7,475  | )    | 
|Depreciation and amortization                |  | e.f.  |  |                   | 680,678   |   |                               |  | (12,023 | )    | 
|Other expenses                               |  |       |  |                   | 123,761   |   |                               |  |         |      | 
|Restructuring charges                        |  |       |  |                   | 8,129     |   |                               |  |         |      | 
|                                             |  |       |  |                   |           |   |                               |  |         |      | 
|Total operating costs and expenses           |  |       |  |                   | 2,385,844 |   |                               |  |         |      | 
|                                             |  |       |  |                   |           |   |                               |  |         |      | 
|Operating (loss) income                      |  |       |  |                   | (9,903    | ) |                               |  |         |      | 
|                                             |  |       |  |                   |           |   |                               |  |         |      | 
|Finance cost                                 |  |       |  |                   |           |   |                               |  |         |      | 
|Interest expenses                            |  |       |  |                   | (297,497  | ) |                               |  |         |      | 
|Interest income                              |  |       |  |                   | 2,748     |   |                               |  |         |      | 
|Foreign currency loss                        |  |       |  |                   | (330,576  | ) |                               |  | 6,062   |      | 
|Exchange (income) loss, net                  |  |       |  |                   | 81,641    |   |                               |  |         |      | 
|Total finance result                         |  |       |  |                   | (543,684  | ) |                               |  |         |      | 
|                                             |  |       |  |                   |           |   |                               |  |         |      | 
|Loss before income taxes                     |  |       |  |                   | (553,587  | ) |                               |  |         |      | 
|                                             |  |       |  |                   |           |   |                               |  |         |      | 
|Income taxes (benefit) expense (note 10 ):   |  | h.    |  |                   | (17,134   | ) |                               |  | 2,244   |      | 
|                                             |  |       |  |                   |           |   |                               |  |         |      | 
|Net loss and comprehensive loss for the year |  |       |  |                   | (536,453  | ) |                               |  |         |      | 
|                                             |  |       |  |                   |           |   |                               |  |         |      | 
|(Loss) and comprehensive (Loss)  per share:  |  |       |  |                   |           |   |                               |  |         |      | 
|Basic (loss) per common share (pesos)        |  |       |  |                   | (0.68     | ) |                               |  |         |      | 
|Diluted (loss) per common share (pesos)      |  |       |  |                   | (0.66     | ) |                               |  |         |      | 
|                                             |  |       |  |                   |           |   |                               |  |         |      | 
|Weighted average basic shares (thousands)    |  |       |  |                   | 789,819   |   |                               |  |         |      | 
|Weighted average diluted shares (thousands)  |  |       |  |                   | 812,882   |   |                               |  |         |      | 



F-52







Notes to the reconciliations



| | a. | According to IFRS 29, Financial Reporting in Hyperinflationary Economies, When an economy
ceases to be hyperinflationary and an entity discontinues the preparation and presentation of financial statements prepared in
accordance with this Standard, it shall treat the amounts expressed in the measuring unit current at the end of the previous reporting
period as the basis for the carrying amounts in its subsequent financial statements. The Mexican economy ceased to be hyperinflationary
in 1999 and, consequently, inflationary effects that were recognized by the Company from 1999 until December 31, 2007 under MFRS
were reversed.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | According to IAS 39, Financial Instruments: Recognition and Measurement (for entities that have
not yet adopted IFRS 9), an embedded foreign currency derivative in a host contract that is not a financial instrument is closely
related to the host contract provided it is not leveraged, does not contain an option feature, and requires payments denominated
in a currency that is commonly used in contracts to purchase or sell non-financial items in the economic environment in which the
transaction takes place (e.g. a relatively stable and liquid currency that is commonly used in local business transactions or external
trade), therefore, the embedded derivative is not accounted for separately from the host contract. Therefore, the effects of the
embedded derivative that were recognized by the Company under MFRS were reversed.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | According to IAS 39, when a financial liability is recognized initially, an entity shall measure
it at its fair value less, in the case of a financial liability not at fair value through profit or loss, transaction costs that
are directly attributable to the acquisition or issue of the financial asset or financial liability. Under MFRS, the Company recognized
an asset for these costs amortizing it using the straight-line method. Therefore, the asset and its amortization recognized by
the Company under MFRS were reversed. After initial recognition, an entity shall measure financial liabilities at amortized cost
using the effective interest method. Therefore, the Company recalculated the financial liability using the accrual of interest
effective interest method.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | According to IAS 19, Employee Benefits, an entity shall recognize termination benefits as
a liability and an expense when, and only when, the entity is demonstrably committed to either: terminate the employment of an
employee or group of employees before the normal retirement date; or provide termination benefits as a result of an offer made
in order to encourage voluntary redundancy. Since the Company is not demonstrably committed the effects of the termination liability
recognized by the Company under MFRS were reversed.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e. | According to IFRIC 1, Changes in Existing Decommissioning, Restoration and Similar Liabilities,
changes in the measurement of an existing decommissioning, restoration and similar liability that result from changes in the discount
rate, when the related asset is measured using the cost model shall be added to, or deducted from, the cost of the related asset
in the current period. Therefore the Company calculated the corresponding effects from changes in the discount rate and recognized
them in the carrying value of the asset and its related liability.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | f. | According to IFRS 1, A first-time adopter may elect to use a previous GAAP revaluation of an item
of property, plant and equipment at, or before, the date of transition to IFRS as deemed cost at the date of the revaluation, if
the revaluation was, at the date of the revaluation, broadly comparable to fair value; or cost or depreciated cost in accordance
with IFRS, adjusted to reflect, for example, changes in a general or specific price index. IFRS does not restrict the use of fair
value as deemed cost to entire classes of asset. The Company elected to use previous GAAP revaluation for the value of certain
items of telephone network systems and equipment as deemed cost.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | g. | According to IAS 39, when measuring the fair value of a liability, the effect of the entity’s
credit risk (credit standing) and any other factors that might influence the likelihood that the obligation will or will not be
fulfilled should be taken into account. Therefore the Company calculated the corresponding effects of the credit risk in the fair
value measurement and recognized them in the carrying value of the derivative financial instrument.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-53







| | h. | According to IAS 12, Income taxes, the deferred tax was re-calculated using the carrying
amount of the assets and liabilities under IFRS.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------



| | i. | All the effects of transition to IFRS were recorded in retained earnings.
| | -- | -------------------------------------------------------------------------



| | j. | Reclassifications were performed to present lines in the statement of comprehensive income according
to IAS 1, Presentation of Financial Statements.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------





NOTE 23 – NEW ACCOUTING PRINCIPLES



The Company has not applied the following
new and revised IFRS that have been issued but are not yet effective:





IFRS 7 ‘Financial Instruments:
Disclosures’; effective for periods beginning on or after July 1, 2011. The amendment requires additional quantitative
and qualitative disclosures relating to transfers of financial assets when financial assets are not derecognized in their entirety,
or when they are derecognized in their entirety but the entity has continuing involvement in them.



IAS 19 ‘Employee Benefits’;
effective for periods beginning on or after January 1, 2013. The revised standard has eliminated the use of the corridor approach
and instead mandated immediate recognition of all re-measurements of the defined benefit liability (asset) including gains and
losses in other comprehensive income.



IFRS 10 ‘Consolidated Financial
Statements’; effective for periods beginning on or after January 1, 2013. The standard replaces the guidance on control
and consolidation in IAS 27 and SIC 12 Consolidation – special purpose entities. The core principle that a consolidated entity
presents a parent and its subsidiaries as if they were a single entity remains unchanged, as do the mechanics of consolidation.



IFRS 12 ‘Disclosures of Interests
in Other Entities’; effective for periods beginning on or after January 1, 2013. The standard requires enhanced disclosures
of the nature, risks and financial effects associated with the Company’s interests in subsidiaries, associates, joint arrangements
and unconsolidated structured entities.



IFRS 13 ‘Fair value measurement’;
effective for periods beginning on or after January 1, 2013. The standard explains how to measure fair value and aims to enhance
fair value disclosures. The standard does not change the measurement of fair value but codifies it in one place.



Amendments to standards



Effective date of May 2012 amendments (Annual
Improvements 2009-2011 Cycle):



IAS 1 ‘Presentation of Financial
Statements’, clarification of the requirements for comparative information.



IAS 16 ‘Property, plant and equipment’,
classification of servicing equipment.



IAS 32 ‘Financial Instruments: Presentation’
, clarifies that tax effect of a distribution to holders of equity instruments should be accounted for in accordance with IAS 12
“Income Taxes”.



IAS 34 ‘Interim Financial Reporting’,
Clarifies interim reporting of segment information for total assets in order to enhance consistency with the requirements in IFRS
8 ‘Operating Segments’.



F-54







MAXCOM TELECOMUNICACIONES, S. A. B. DE
C. V. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Thousands of Mexican pesos — note
5)



|                                                      |  |        |            |   |     |  |         |     |  |  |        |  |  |        |        |  |     |  |         |                |  |  |               |   |  |             |     |   |                |  |      |          |  |  |          |   |  | Non               |        |   |        |  |         |      |  |  |             |  |  |              |    
|----------------------------------------------------- |  | ------ | ---------- | - | --- |  | ------- | --- |  |  | ------ |  |  | ------ | ------ |  | --- |  | ------- | -------------- |  |  | ------------- | - |  | ----------- | --- | - | -------------- |  | ---- | -------- |  |  | -------- | - |  | ----------------- | ------ | - | ------ |  | ------- | ---- |  |  | ----------- |  |  | ------------ | ---
|                                                      |  | Maxcom |            |   | MSA |  |         | CTE |  |  | OOP    |  |  | TECBTC |        |  | MSF |  |         | Maxcom
    USA |  |  | Maxcom
    TV |   |  | Telereunión |     |   | Sierra
    USA |  |      | Telscape |  |  | SCG      |   |  | Guarantor
    ATE |        |   | MAXCEL |  |         | SMSF |  |  | Elimination |  |  | Consolidated |    
|Balance sheet as of December 31, 2012:                |  |        |            |   |     |  |         |     |  |  |        |  |  |        |        |  |     |  |         |                |  |  |               |   |  |             |     |   |                |  |      |          |  |  |          |   |  |                   |        |   |        |  |         |      |  |  |             |  |  |              |    
|Cash and cash equivalents and Current restricted cash |  | $      | 142,728    |   |     |  | 82      |     |  |  | 293    |  |  |        | 640    |  |     |  | 304     |                |  |  | 124           |   |  |             | -   |   |                |  | -    |          |  |  | 101      |   |  |                   | 2,179  |   |        |  | -       |      |  |  | 58          |  |  |              | 9  
|Accounts receivable - net                             |  |        | 613,619    |   |     |  | 117,652 |     |  |  | 34,589 |  |  |        | 78,639 |  |     |  | 213,243 |                |  |  | 8,548         |   |  |             | 109 |   |                |  | 439  |          |  |  | 237,546  |   |  |                   | 9,327  |   |        |  | 6,642   |      |  |  | 12,052      |  |  |              | 108
|Inventory - net                                       |  |        | 17,512     |   |     |  | -       |     |  |  | -      |  |  |        | -      |  |     |  | -       |                |  |  | 0             |   |  |             | -   |   |                |  | -    |          |  |  | 0        |   |  |                   | 0      |   |        |  | -       |      |  |  | -           |  |  |              | -  
|Prepaid expenses                                      |  |        | 16,031     |   |     |  | -       |     |  |  | -      |  |  |        | 0      |  |     |  | 0       |                |  |  | -             |   |  |             | -   |   |                |  | -    |          |  |  |          |   |  |                   | 15     |   |        |  | -       |      |  |  | -           |  |  |              | -  
|Investment in subsidiaries                            |  |        | 84,306     |   |     |  | 200     |     |  |  | -      |  |  |        | -      |  |     |  | -       |                |  |  | -             |   |  |             | -   |   |                |  | -    |          |  |  | -        |   |  |                   | -      |   |        |  | -       |      |  |  | -           |  |  |              | -  
|Telephone network system and Equipment net            |  |        | 3,823,821  |   |     |  | -       |     |  |  | -      |  |  |        | -      |  |     |  | -       |                |  |  | -             |   |  |             | -   |   |                |  | -    |          |  |  | 34,450   |   |  |                   | 5,092  |   |        |  | 20,985  |      |  |  | 7,898       |  |  |              | -  
|Intangible assets - net                               |  |        | 136,326    |   |     |  | -       |     |  |  | -      |  |  |        | -      |  |     |  | -       |                |  |  | -             |   |  |             | -   |   |                |  | -    |          |  |  | -        |   |  |                   | -      |   |        |  | -       |      |  |  | -           |  |  |              | -  
|Deposits                                              |  |        | 6,711      |   |     |  | -       |     |  |  | 407    |  |  |        | -      |  |     |  | -       |                |  |  | -             |   |  |             | -   |   |                |  | -    |          |  |  | 636      |   |  |                   | 15     |   |        |  | -       |      |  |  | -           |  |  |              | -  
|Derivative financial instruments                      |  |        | 32,141     |   |     |  | -       |     |  |  | -      |  |  |        | -      |  |     |  | -       |                |  |  | -             |   |  |             | -   |   |                |  | -    |          |  |  | -        |   |  |                   | -      |   |        |  | -       |      |  |  | -           |  |  |              | -  
|Deferred taxes                                        |  |        | -          |   |     |  | 9,025   |     |  |  | 747    |  |  |        | 17     |  |     |  | -       |                |  |  | -             |   |  |             | -   |   |                |  | -    |          |  |  | -        |   |  |                   | -      |   |        |  | -       |      |  |  | -           |  |  |              | -  
|Other assets                                          |  |        | 269,013    |   |     |  | 8,195   |     |  |  | -      |  |  |        | 8      |  |     |  | 3       |                |  |  | 0             |   |  |             | -   |   |                |  | -    |          |  |  | -        |   |  |                   | -      |   |        |  | -       |      |  |  | -           |  |  |              | -  
|Total assets                                          |  | $      | 5,142,208  |   |     |  | 135,154 |     |  |  | 36,036 |  |  |        | 79,304 |  |     |  | 213,550 |                |  |  | 8,672         |   |  |             | 109 |   |                |  | 439  |          |  |  | 272,733  |   |  |                   | 16,628 |   |        |  | 27,627  |      |  |  | 20,008      |  |  |              | 117
|                                                      |  |        |            |   |     |  |         |     |  |  |        |  |  |        |        |  |     |  |         |                |  |  |               |   |  |             |     |   |                |  |      |          |  |  |          |   |  |                   |        |   |        |  |         |      |  |  |             |  |  |              |    
|Total liabilities                                     |  | $      | 3,009,730  |   |     |  | 89,477  |     |  |  | 29,783 |  |  |        | 69,752 |  |     |  | 205,817 |                |  |  | 624           |   |  |             | 41  |   |                |  | 879  |          |  |  | 286,582  |   |  |                   | 4,716  |   |        |  | 1,777   |      |  |  | 1,679       |  |  |              | 66 
|Shareholders’ Equity:                                 |  |        |            |   |     |  |         |     |  |  |        |  |  |        |        |  |     |  |         |                |  |  |               |   |  |             |     |   |                |  |      |          |  |  |          |   |  |                   |        |   |        |  |         |      |  |  |             |  |  |              |    
|Capital Stock and Additional Paid- In Capital         |  |        | 4,818,533  |   |     |  | 66      |     |  |  | 96     |  |  |        | 55     |  |     |  | 53      |                |  |  | 171,497       |   |  |             | 127 |   |                |  | 55   |          |  |  | 717,462  |   |  |                   | 13,044 |   |        |  | 97,874  |      |  |  | 11,308      |  |  |              | 50 
|Accumulated deficit                                   |  |        | (2,686,055 | ) |     |  | 45,611  |     |  |  | 6,157  |  |  |        | 9,497  |  |     |  | 7,680   |                |  |  | (163,449      | ) |  |             | (59 | ) |                |  | (495 | )        |  |  | (731,311 | ) |  |                   | (1,132 | ) |        |  | (72,024 | )    |  |  | 7,021       |  |  |              | 1  
|Repurchase of shares                                  |  |        |            |   |     |  | -       |     |  |  | -      |  |  |        | -      |  |     |  | -       |                |  |  | -             |   |  |             | -   |   |                |  | -    |          |  |  | -        |   |  |                   | -      |   |        |  | -       |      |  |  | -           |  |  |              | -  
|Total shareholders’ equity                            |  |        | 2,132,478  |   |     |  | 45,677  |     |  |  | 6,253  |  |  |        | 9,552  |  |     |  | 7,733   |                |  |  | 8,048         |   |  |             | 68  |   |                |  | (440 | )        |  |  | (13,849  | ) |  |                   | 11,912 |   |        |  | 25,850  |      |  |  | 18,329      |  |  |              | 51 
|Total liabilities and shareholders - equity           |  |        | 5,142,208  |   |     |  | 135,154 |     |  |  | 36,036 |  |  |        | 79,304 |  |     |  | 213,550 |                |  |  | 8,672         |   |  |             | 109 |   |                |  | 439  |          |  |  | 272,733  |   |  |                   | 16,628 |   |        |  | 27,627  |      |  |  | 20,008      |  |  |              | 117



F-55







MAXCOM TELECOMUNICACIONES, S. A. B. DE
C. V. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Thousands of Mexican pesos — note
5)



|                                                               |  |        |            |   |     |  |         |     |  |  |         |   |  |        |         |   |     |  |         |                |  |  |               |   |  |             |     |   |                |  |   |          |  |  |         |   |  | Non               |        |   |        |  |       |      |  |  |             |   |  |              |  
|-------------------------------------------------------------- |  | ------ | ---------- | - | --- |  | ------- | --- |  |  | ------- | - |  | ------ | ------- | - | --- |  | ------- | -------------- |  |  | ------------- | - |  | ----------- | --- | - | -------------- |  | - | -------- |  |  | ------- | - |  | ----------------- | ------ | - | ------ |  | ----- | ---- |  |  | ----------- | - |  | ------------ | -
|                                                               |  | Maxcom |            |   | MSA |  |         | CTE |  |  | OOP     |   |  | TECBTC |         |   | MSF |  |         | Maxcom
    USA |  |  | Maxcom
    TV |   |  | Telereunión |     |   | Sierra
    USA |  |   | Telscape |  |  | SCG     |   |  | Guarantor
    ATE |        |   | MAXCEL |  |       | SMSF |  |  | Elimination |   |  | Consolidated |  
|Statements of Operations for the year ended December 31, 2012: |  |        |            |   |     |  |         |     |  |  |         |   |  |        |         |   |     |  |         |                |  |  |               |   |  |             |     |   |                |  |   |          |  |  |         |   |  |                   |        |   |        |  |       |      |  |  |             |   |  |              |  
|Revenues                                                       |  | $      | 2,201,252  |   |     |  | 69,740  |     |  |  | 75,255  |   |  |        | 29,096  |   |     |  | 92,257  |                |  |  | -             |   |  |             | -   |   |                |  | - |          |  |  | 32,339  |   |  |                   | 1,259  |   |        |  | 1,143 |      |  |  | 2,552       |   |  |              | -
|Operating cost and expenses                                    |  |        | (2,272,524 | ) |     |  | (73,895 | )   |  |  | (74,890 | ) |  |        | (29,179 | ) |     |  | (91,906 | )              |  |  | (3            | ) |  |             | (31 | ) |                |  | 0 |          |  |  | (26,686 | ) |  |                   | (1,174 | ) |        |  | (9    | )    |  |  | (814        | ) |  |              | -
|Integral (cost) income of financing                            |  |        | (71,861    | ) |     |  | 11,619  |     |  |  | 2,257   |   |  |        | 1,403   |   |     |  | 2,405   |                |  |  | 681           |   |  |             | -   |   |                |  | 0 |          |  |  | (4,538  | ) |  |                   | 853    |   |        |  | 0     |      |  |  | 29          |   |  |              | 1
|Taxes                                                          |  |        |            |   |     |  | (5,650  | )   |  |  | (1,937  | ) |  |        | (990    | ) |     |  | (1,885  | )              |  |  | 0             |   |  |             | -   |   |                |  | 4 |          |  |  | -       |   |  |                   | -      |   |        |  | (393  | )    |  |  |             |   |  |              | 0
|Net (loss) income                                              |  | $      | (143,133   | ) |     |  | 1,814   |     |  |  | 685     |   |  |        | 330     |   |     |  | 871     |                |  |  | 678           |   |  |             | (31 | ) |                |  | 4 |          |  |  | 1,115   |   |  |                   | 938    |   |        |  | 741   |      |  |  | 1,767       |   |  |              | 1



F-56







MAXCOM TELECOMUNICACIONES, S. A. B. DE
C. V. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Thousands of Mexican pesos — note
5)



|                                                                                       |  |        |          |   |     |  |        |     |  |  |        |   |  |        |       |   |     |  |        |                |  |  |               |   |  |             |     |   |                |  |   |          |  |  |         |   |  | Non               |        |   |        |  |        |      |  |  |             |   |  |              |   
|-------------------------------------------------------------------------------------- |  | ------ | -------- | - | --- |  | ------ | --- |  |  | ------ | - |  | ------ | ----- | - | --- |  | ------ | -------------- |  |  | ------------- | - |  | ----------- | --- | - | -------------- |  | - | -------- |  |  | ------- | - |  | ----------------- | ------ | - | ------ |  | ------ | ---- |  |  | ----------- | - |  | ------------ | --
|                                                                                       |  | Maxcom |          |   | MSA |  |        | CTE |  |  | OOP    |   |  | TECBTC |       |   | MSF |  |        | Maxcom
    USA |  |  | Maxcom
    TV |   |  | Telereunión |     |   | Sierra
    USA |  |   | Telscape |  |  | SCG     |   |  | Guarantor
    ATE |        |   | MAXCEL |  |        | SMSF |  |  | Elimination |   |  | Consolidated |   
|Statement of Cash Flows under  IFRS for the Year Ended
    December 31, 2012 :         |  |        |          |   |     |  |        |     |  |  |        |   |  |        |       |   |     |  |        |                |  |  |               |   |  |             |     |   |                |  |   |          |  |  |         |   |  |                   |        |   |        |  |        |      |  |  |             |   |  |              |   
|Net (loss) income the year under IFRS                                                  |  | $      | (143,133 | ) |     |  | 7,464  |     |  |  | 2,622  |   |  |        | 1,320 |   |     |  | 2,756  |                |  |  | 678           |   |  |             | (31 | ) |                |  | 0 |          |  |  | 1,115   |   |  |                   | 938    |   |        |  | 1,134  |      |  |  | 1,767       |   |  |              | 1 
|Depreciation and amortization                                                          |  |        | 560,461  |   |     |  | 0      |     |  |  | 0      |   |  |        | 0     |   |     |  | 0      |                |  |  | 0             |   |  |             | 0   |   |                |  | 0 |          |  |  | 14,500  |   |  |                   | 792    |   |        |  | 0      |      |  |  | 811         |   |  |              | 0 
|Other adjustments to reconcile net income to
    cash provided by operating activities |  |        | 91,679   |   |     |  | 0      |     |  |  | 0      |   |  |        | 0     |   |     |  | 0      |                |  |  | 0             |   |  |             | 0   |   |                |  | 0 |          |  |  | 0       |   |  |                   |        |   |        |  | 0      |      |  |  | 0           |   |  |              | 0 
|Net change in working capital                                                          |  |        | 263,451  |   |     |  | (7,649 | )   |  |  | (2,622 | ) |  |        | (802  | ) |     |  | (2,649 | )              |  |  | (678          | ) |  |             | 31  |   |                |  |   |          |  |  | (16,179 | ) |  |                   | (2,316 | ) |        |  | (1,134 | )    |  |  | (2,549      | ) |  |              | (3
|Resources (used in) provided by Operating activities                                   |  |        | 772,458  |   |     |  | (185   | )   |  |  | 0      |   |  |        | 518   |   |     |  | 107    |                |  |  | 0             |   |  |             | (0  | ) |                |  | 0 |          |  |  | (564    | ) |  |                   | (586   | ) |        |  | 0      |      |  |  | 29          |   |  |              | (2
|Resources used in financing activities                                                 |  |        | (441,382 | ) |     |  | 0      |     |  |  | 0      |   |  |        | 0     |   |     |  | 0      |                |  |  | 0             |   |  |             | 0   |   |                |  | 0 |          |  |  | 0       |   |  |                   | 0      |   |        |  | 0      |      |  |  | 0           |   |  |              | 0 
|Resources (used in) provided by investing activities                                   |  |        | (581,036 | ) |     |  | 0      |     |  |  | 0      |   |  |        | 0     |   |     |  | 0      |                |  |  | 0             |   |  |             | 0   |   |                |  | 0 |          |  |  | 611     |   |  |                   | 0      |   |        |  | 0      |      |  |  | 0           |   |  |              | 0 
|Cash and cash equivalents:                                                             |  |        |          |   |     |  |        |     |  |  |        |   |  |        |       |   |     |  |        |                |  |  |               |   |  |             |     |   |                |  |   |          |  |  |         |   |  |                   |        |   |        |  |        |      |  |  |             |   |  |              |   
|Net increase (decrease) in cash and cash equivalents                                   |  |        | (249,960 | ) |     |  | (185   | )   |  |  | 0      |   |  |        | 518   |   |     |  | 107    |                |  |  | 0             |   |  |             | (0  | ) |                |  | 0 |          |  |  | 47      |   |  |                   | (586   | ) |        |  | 0      |      |  |  | 29          |   |  |              | (2
|Beginning balances                                                                     |  |        | 392,688  |   |     |  | 267    |     |  |  | 293    |   |  |        | 122   |   |     |  | 197    |                |  |  | 124           |   |  |             | 0   |   |                |  | 0 |          |  |  | 54      |   |  |                   | 2,765  |   |        |  | 0      |      |  |  | 29          |   |  |              | 11
|Ending balances                                                                        |  | $      | 142,728  |   |     |  | 82     |     |  |  | 293    |   |  |        | 640   |   |     |  | 304    |                |  |  | 124           |   |  |             | (0  | ) |                |  | 0 |          |  |  | 101     |   |  |                   | 2,179  |   |        |  | 0      |      |  |  | 58          |   |  |              | 9 



F-57







MAXCOM TELECOMUNICACIONES, S. A. B. DE
C. V. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Thousands of Mexican pesos — note
5)



|                                              |  |        |            |   |     |  |         |     |  |  |        |  |  |        |        |  |     |  |        |                |  |  |               |   |  |             |     |   |                |  |      |          |  |  |          |   |  | Non               |        |   |        |  |         |      |  |  |             |  |  |              |   
|--------------------------------------------- |  | ------ | ---------- | - | --- |  | ------- | --- |  |  | ------ |  |  | ------ | ------ |  | --- |  | ------ | -------------- |  |  | ------------- | - |  | ----------- | --- | - | -------------- |  | ---- | -------- |  |  | -------- | - |  | ----------------- | ------ | - | ------ |  | ------- | ---- |  |  | ----------- |  |  | ------------ | --
|                                              |  | Maxcom |            |   | MSA |  |         | CTE |  |  | OOP    |  |  | TECBTC |        |  | MSF |  |        | Maxcom
    USA |  |  | Maxcom
    TV |   |  | Telereunión |     |   | Sierra
    USA |  |      | Telscape |  |  | SCG      |   |  | Guarantor
    ATE |        |   | MAXCEL |  |         | SMSF |  |  | Elimination |  |  | Consolidated |   
|Balance sheet as of December 31, 2011:        |  |        |            |   |     |  |         |     |  |  |        |  |  |        |        |  |     |  |        |                |  |  |               |   |  |             |     |   |                |  |      |          |  |  |          |   |  |                   |        |   |        |  |         |      |  |  |             |  |  |              |   
|Cash and cash equivalents                     |  | $      | 392,690    |   |     |  | 267     |     |  |  | 293    |  |  |        | 122    |  |     |  | 197    |                |  |  | 124           |   |  |             | -   |   |                |  | -    |          |  |  | 54       |   |  |                   | 2,765  |   |        |  | -       |      |  |  | 29          |  |  |              | 11
|Accounts receivable - net                     |  |        | 1,375,525  |   |     |  | 472,119 |     |  |  | 34,589 |  |  |        | 15,141 |  |     |  | 21,956 |                |  |  | 7,432         |   |  |             | 110 |   |                |  | -    |          |  |  | 4,829    |   |  |                   | 7,005  |   |        |  | 5,021   |      |  |  | 9,106       |  |  |              | - 
|Inventory - net                               |  |        | 8,895      |   |     |  | -       |     |  |  | -      |  |  |        | -      |  |     |  | -      |                |  |  | -             |   |  |             | -   |   |                |  | -    |          |  |  | -        |   |  |                   | -      |   |        |  | -       |      |  |  | -           |  |  |              | - 
|Prepaid expenses                              |  |        | 19,352     |   |     |  | 4,162   |     |  |  | -      |  |  |        | 8      |  |     |  | 67     |                |  |  | -             |   |  |             | -   |   |                |  | -    |          |  |  | -        |   |  |                   | 15     |   |        |  | -       |      |  |  | -           |  |  |              | - 
|Investment in subsidiaries                    |  |        | 899,918    |   |     |  | 200     |     |  |  | -      |  |  |        | -      |  |     |  | -      |                |  |  | -             |   |  |             | -   |   |                |  | -    |          |  |  | -        |   |  |                   | -      |   |        |  | -       |      |  |  | -           |  |  |              | - 
|Telephone network system and Equipment net    |  |        | 3,871,779  |   |     |  | -       |     |  |  | -      |  |  |        | -      |  |     |  | -      |                |  |  | -             |   |  |             | -   |   |                |  | -    |          |  |  | 48,950   |   |  |                   | 5,884  |   |        |  | 20,985  |      |  |  | 8,709       |  |  |              | - 
|Intangible assets - net                       |  |        | 127,419    |   |     |  | -       |     |  |  | -      |  |  |        | -      |  |     |  | -      |                |  |  | -             |   |  |             | -   |   |                |  | -    |          |  |  | -        |   |  |                   | -      |   |        |  | -       |      |  |  | -           |  |  |              | - 
|Guaranty deposits                             |  |        | 6,648      |   |     |  | -       |     |  |  | 407    |  |  |        | -      |  |     |  | -      |                |  |  | -             |   |  |             | -   |   |                |  | -    |          |  |  | 635      |   |  |                   | 19     |   |        |  | -       |      |  |  | -           |  |  |              | - 
|Derivative financial instruments              |  |        | 81,641     |   |     |  | -       |     |  |  | -      |  |  |        | -      |  |     |  | -      |                |  |  | -             |   |  |             | -   |   |                |  | -    |          |  |  | -        |   |  |                   | -      |   |        |  | -       |      |  |  | -           |  |  |              | - 
|Deferred taxes                                |  |        | -          |   |     |  | 16,753  |     |  |  | 747    |  |  |        | 70     |  |     |  | 135    |                |  |  | -             |   |  |             | -   |   |                |  | -    |          |  |  | -        |   |  |                   | -      |   |        |  | -       |      |  |  | -           |  |  |              | - 
|Other assets                                  |  |        | 239,649    |   |     |  | -       |     |  |  | -      |  |  |        | 181    |  |     |  | 1,236  |                |  |  | -             |   |  |             | -   |   |                |  | -    |          |  |  | 3,799    |   |  |                   | (1     | ) |        |  | -       |      |  |  | -           |  |  |              | - 
|Total assets                                  |  | $      | 7,023,516  |   |     |  | 493,501 |     |  |  | 36,036 |  |  |        | 15,522 |  |     |  | 23,591 |                |  |  | 7,556         |   |  |             | 110 |   |                |  | 0    |          |  |  | 58,267   |   |  |                   | 15,687 |   |        |  | 26,006  |      |  |  | 17,844      |  |  |              | 11
|                                              |  |        |            |   |     |  |         |     |  |  |        |  |  |        |        |  |     |  |        |                |  |  |               |   |  |             |     |   |                |  |      |          |  |  |          |   |  |                   |        |   |        |  |         |      |  |  |             |  |  |              |   
|Total liabilities                             |  | $      | 3,935,861  |   |     |  | 449,638 |     |  |  | 29,783 |  |  |        | 6,300  |  |     |  | 16,679 |                |  |  | 186           |   |  |             | 10  |   |                |  | 492  |          |  |  | 73,521   |   |  |                   | 4,714  |   |        |  | 897     |      |  |  | 1,283       |  |  |              | 11
|Shareholders’ Equity:                         |  |        |            |   |     |  |         |     |  |  |        |  |  |        |        |  |     |  |        |                |  |  |               |   |  |             |     |   |                |  |      |          |  |  |          |   |  |                   |        |   |        |  |         |      |  |  |             |  |  |              |   
|Capital Stock and Additional Paid- In Capital |  |        | 5,631,482  |   |     |  | 66      |     |  |  | 96     |  |  |        | 55     |  |     |  | 50     |                |  |  | 171,497       |   |  |             | 127 |   |                |  | 55   |          |  |  | 717,173  |   |  |                   | 13,044 |   |        |  | 97,874  |      |  |  | 11,308      |  |  |              | - 
|Accumulated deficit                           |  |        | (2,543,827 | ) |     |  | 43,797  |     |  |  | 6,157  |  |  |        | 9,167  |  |     |  | 6,862  |                |  |  | (164,127      | ) |  |             | (27 | ) |                |  | (547 | )        |  |  | (732,427 | ) |  |                   | (2,071 | ) |        |  | (72,765 | )    |  |  | 5,253       |  |  |              | - 
|Repurchase of shares                          |  |        | -          |   |     |  | -       |     |  |  | -      |  |  |        | -      |  |     |  | -      |                |  |  | -             |   |  |             | -   |   |                |  | -    |          |  |  | -        |   |  |                   | -      |   |        |  | -       |      |  |  | -           |  |  |              | - 
|Total shareholders’ equity                    |  |        | 3,087,655  |   |     |  | 43,863  |     |  |  | 6,253  |  |  |        | 9,222  |  |     |  | 6,912  |                |  |  | 7,370         |   |  |             | 100 |   |                |  | (492 | )        |  |  | (15,254  | ) |  |                   | 10,973 |   |        |  | 25,109  |      |  |  | 16,561      |  |  |              | 0 
|Total liabilities and shareholders - equity   |  |        | 7,023,516  |   |     |  | 493,501 |     |  |  | 36,036 |  |  |        | 15,522 |  |     |  | 23,591 |                |  |  | 7,556         |   |  |             | 110 |   |                |  | 0    |          |  |  | 58,267   |   |  |                   | 15,687 |   |        |  | 26,006  |      |  |  | 17,844      |  |  |              | 11



F-58







MAXCOM TELECOMUNICACIONES, S. A. B. DE
C. V. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Thousands of Mexican pesos —
note 5)



|                                                               |  |        |            |   |     |  |          |     |  |  |         |   |  |        |         |   |     |  |         |                |  |  |               |   |  |             |   |  |                |  |      |          |  |  |         |   |  | Non               |        |   |        |  |       |      |  |  |             |   |  |              |      
|-------------------------------------------------------------- |  | ------ | ---------- | - | --- |  | -------- | --- |  |  | ------- | - |  | ------ | ------- | - | --- |  | ------- | -------------- |  |  | ------------- | - |  | ----------- | - |  | -------------- |  | ---- | -------- |  |  | ------- | - |  | ----------------- | ------ | - | ------ |  | ----- | ---- |  |  | ----------- | - |  | ------------ | -----
|                                                               |  | Maxcom |            |   | MSA |  |          | CTE |  |  | OOP     |   |  | TECBTC |         |   | MSF |  |         | Maxcom
    USA |  |  | Maxcom
    TV |   |  | Telereunión |   |  | Sierra
    USA |  |      | Telscape |  |  | SCG     |   |  | Guarantor
    ATE |        |   | MAXCEL |  |       | SMSF |  |  | Elimination |   |  | Consolidated |      
|Statements of Operations for the year ended December 31, 2011: |  |        |            |   |     |  |          |     |  |  |         |   |  |        |         |   |     |  |         |                |  |  |               |   |  |             |   |  |                |  |      |          |  |  |         |   |  |                   |        |   |        |  |       |      |  |  |             |   |  |              |      
|Revenues                                                       |  | $      | 2,375,941  |   |     |  | 344,844  |     |  |  | 66,460  |   |  |        | 23,985  |   |     |  | 75,314  |                |  |  | 3             |   |  |             | - |  |                |  | 157  |          |  |  | 44,460  |   |  |                   | 1,140  |   |        |  | 1,147 |      |  |  | 2,552       |   |  |              | 18   
|Operating cost and expenses                                    |  |        | (2,399,483 | ) |     |  | (334,627 | )   |  |  | (63,821 | ) |  |        | (23,315 | ) |     |  | (73,097 | )              |  |  | (14           | ) |  |             | - |  |                |  | (157 | )        |  |  | (23,124 | ) |  |                   | (1,087 | ) |        |  | (10   | )    |  |  | (827        | ) |  |              | -3.00
|Integral (cost) income of financing                            |  |        | (529,017   | ) |     |  | 6,181    |     |  |  | 992     |   |  |        | 807     |   |     |  | 968     |                |  |  | 567           |   |  |             | - |  |                |  | -    |          |  |  | (18,792 | ) |  |                   | 686    |   |        |  | -     |      |  |  | 2           |   |  |              | (15  
|Taxes                                                          |  |        | -          |   |     |  | 12,031   |     |  |  | 999     |   |  |        | 1,267   |   |     |  | 689     |                |  |  | -             |   |  |             | - |  |                |  | (9   | )        |  |  | -       |   |  |                   | -      |   |        |  | (84   | )    |  |  | -           |   |  |              | -    
|Net (loss) income                                              |  | $      | (552,559   | ) |     |  | 28,429   |     |  |  | 4,630   |   |  |        | 2,744   |   |     |  | 3,874   |                |  |  | 556           |   |  |             | - |  |                |  | (9   | )        |  |  | 2,544   |   |  |                   | 739    |   |        |  | 1,053 |      |  |  | 1,727       |   |  |              | 0    



F-59







MAXCOM TELECOMUNICACIONES, S. A. B. DE
C. V. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Thousands of Mexican pesos —
note 5)



|                                                                                       |  |        |          |   |     |  |         |     |  |  |        |   |  |        |         |   |     |  |         |                |  |  |               |   |  |             |   |  |                |  |   |          |  |  |         |   |  | Non               |        |   |        |  |        |      |  |  |             |   |  |              |   
|-------------------------------------------------------------------------------------- |  | ------ | -------- | - | --- |  | ------- | --- |  |  | ------ | - |  | ------ | ------- | - | --- |  | ------- | -------------- |  |  | ------------- | - |  | ----------- | - |  | -------------- |  | - | -------- |  |  | ------- | - |  | ----------------- | ------ | - | ------ |  | ------ | ---- |  |  | ----------- | - |  | ------------ | --
|                                                                                       |  | Maxcom |          |   | MSA |  |         | CTE |  |  | OOP    |   |  | TECBTC |         |   | MSF |  |         | Maxcom
    USA |  |  | Maxcom
    TV |   |  | Telereunión |   |  | Sierra
    USA |  |   | Telscape |  |  | SCG     |   |  | Guarantor
    ATE |        |   | MAXCEL |  |        | SMSF |  |  | Elimination |   |  | Consolidated |   
|Statement of Cash Flows under IFRS for the Year Ended December 31,
    2012:           |  |        |          |   |     |  |         |     |  |  |        |   |  |        |         |   |     |  |         |                |  |  |               |   |  |             |   |  |                |  |   |          |  |  |         |   |  |                   |        |   |        |  |        |      |  |  |             |   |  |              |   
|Net (loss) income the year under IFRS                                                  |  | $      | (552,559 | ) |     |  | 16,398  |     |  |  | 3,631  |   |  |        | 1,477   |   |     |  | 3,185   |                |  |  | 556           |   |  |             | - |  |                |  | 0 |          |  |  | 2,544   |   |  |                   | 739    |   |        |  | 1,137  |      |  |  | 1,727       |   |  |              | 0 
|Depreciation and amortization                                                          |  |        | 652,589  |   |     |  |         |     |  |  |        |   |  |        |         |   |     |  |         |                |  |  |               |   |  |             |   |  |                |  |   |          |  |  | 14,500  |   |  |                   | 755    |   |        |  |        |      |  |  | 812         |   |  |              |   
|Other adjustments to reconcile net income to
    cash provided by operating activities |  |        | 598,293  |   |     |  |         |     |  |  |        |   |  |        |         |   |     |  |         |                |  |  |               |   |  |             |   |  |                |  |   |          |  |  |         |   |  |                   |        |   |        |  |        |      |  |  |             |   |  |              |   
|Net change in working capital                                                          |  |        | 39,837   |   |     |  | (17,031 | )   |  |  | (3,432 | ) |  |        | (24,121 | ) |     |  | (72,736 | )              |  |  | (552          | ) |  |             |   |  |                |  | 0 |          |  |  | (1,927  | ) |  |                   | (1,501 | ) |        |  | (1,137 | )    |  |  | (2,553      | ) |  |              |   
|Resources (used in) provided by Operating activities                                   |  |        | 738,160  |   |     |  | (633    | )   |  |  | 199    |   |  |        | #####   |   |     |  | (69,551 | )              |  |  | 4             |   |  |             | - |  |                |  | 0 |          |  |  | 15,117  |   |  |                   | (7     | ) |        |  | 0      |      |  |  | (14         | ) |  |              | 0 
|Resources used in financing activities                                                 |  |        | (298,738 | ) |     |  | -       |     |  |  | -      |   |  |        | 20,961  |   |     |  | 65,591  |                |  |  |               |   |  |             |   |  |                |  |   |          |  |  | (15,342 | ) |  |                   |        |   |        |  | 0      |      |  |  | 16          |   |  |              | 0 
|Resources (used in) provided by investing activities                                   |  |        | (417,155 | ) |     |  | -       |     |  |  | -      |   |  |        | 1,675   |   |     |  | 3,643   |                |  |  |               |   |  |             |   |  |                |  |   |          |  |  | 48      |   |  |                   | (2     | ) |        |  |        |      |  |  |             |   |  |              |   
|Cash and cash equivalents:                                                             |  |        |          |   |     |  |         |     |  |  |        |   |  |        |         |   |     |  |         |                |  |  |               |   |  |             |   |  |                |  |   |          |  |  |         |   |  |                   |        |   |        |  |        |      |  |  |             |   |  |              |   
|Net increase (decrease) in cash and cash equivalents                                   |  |        | 22,267   |   |     |  | (633    | )   |  |  | 199    |   |  |        | (8      | ) |     |  | (317    | )              |  |  | 4             |   |  |             | - |  |                |  | 0 |          |  |  | (177    | ) |  |                   | (9     | ) |        |  | 0      |      |  |  | 2           |   |  |              | 0 
|Beginning balances                                                                     |  |        | 370,423  |   |     |  | 900     |     |  |  | 94     |   |  |        | 130     |   |     |  | 514     |                |  |  | 120           |   |  |             |   |  |                |  |   |          |  |  | 231     |   |  |                   | 2,774  |   |        |  |        |      |  |  | 27          |   |  |              | 11
|Ending balances                                                                        |  | $      | 392,690  |   |     |  | 267     |     |  |  | 293    |   |  |        | 122     |   |     |  | 197     |                |  |  | 124           |   |  |             | - |  |                |  | 0 |          |  |  | 54      |   |  |                   | 2,765  |   |        |  | 0      |      |  |  | 29          |   |  |              | 11



F-60







ITEM
19. EXHIBITS



|1.1   | Amended and Restated Bylaws (estatutos)of Maxcom Telecomunicaciones, S.A. de C.V. (English translation).                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2.1   | Senior Note Indenture, dated December 20, 2006, among Maxcom Telecomunicaciones, S.A. de C.V., Maxcom Servicios Administrativos, S.A. de C.V., Outsourcing Operadora de Personal, S.A. de C.V., Técnicos Especializados en Telecomunicaciones, S.A. de C.V., Corporativo en Telecomunicaciones, S.A. de C.V., Maxcom SF, S.A. de C.V., Maxcom TV, S.A. de C.V., Maxcom USA, Inc. and Deutsche Bank Trust Company Americas, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 26, 2007, is incorporated herein by reference.
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2.2   | First Supplemental Indenture, dated September 5, 2007, among Maxcom, the guarantors a party thereto and Deutsche Bank Trust Company Americas, as trustee, filed as an exhibit to our registration statement on Form F-1/A (No. 333-145800), filed with the SEC on November 1, 2007, is incorporated herein by reference.                                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2.3 * | Second Supplemental Indenture, dated January 25, 2008, among Sierra Comunicaciones Globales, S.A. de C.V., the existing guarantors party thereto and Deutsche Bank Trust Company Americas, as trustee.                                                                                                                                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2.4   | Form of Deposit Agreement among Maxcom, the Depositary named therein and all holders of American Depositary Shares issued thereunder, filed as an exhibit to our registration statement on Form F-1/A (No. 333-144771), filed with the SEC on October 2, 2007, is incorporated herein by reference.                                                                                                                                                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2.5   | Form of Registration Rights Agreement by and among Maxcom, Nexus-Maxcom Holdings I, LLC, BASCFC-Maxcom Holding I, LLC, BAS Capital Funding Corporation, BankAmerica Investment Corporation and the other stockholders party thereto, filed as an exhibit to our registration statement on Form F-1/A (No. 333-144771), filed with the SEC on October 2, 2007, is incorporated herein by reference.                                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2.6   | Third Amended and Restated Securityholders Agreement, dated July 20, 2006, among Maxcom Telecomunicaciones, S.A. de C.V. and certain of its shareholders, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 26, 2007, is incorporated herein by reference.                                                                                                                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2.7   | Third Supplemental Indenture dated as of December 31, 2008, among Telereunion, S.A. de C.V., Telescape, S.A. de C.V., Sierra US Communication, Inc. an each a direct or indirect subsiciary of Maxcom Telecomunicaciones S.A.B. de C.V., a limited liability public stock corporation.                                                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2.8   | Fourth Supplemental Indenture dated as of February 23, 2010, among Asesores Telcoop, S.A. de C.V. an indirect subsiciary of Maxcom Telecomunicaciones S.A.B. de C.V., a limited liability public stock corporation.                                                                                                                                                                                                                                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|3.1   | CPO Trust Agreement effective April 25, 2002 among Maxcom., its shareholders and Banco Nacional de México, S.A., Institución de Banca Múltiple, Grupo Financiero Banamex Accival, as trustee, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on July 1, 2002, is incorporated herein by reference.                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|3.2   | CPO Trust Agreement, dated October 17, 2007, among Maxcom Telecomunicaciones, S.A. de C.V., its shareholders and Nacional Financiera, S.N.C. (English translation), filed as an exhibit to our registration statement on Form F-1/A (No. 333-144771), filed with the SEC on October 17, 2007, is incorporated herein by reference.                                                                                                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|3.3   | CPO Deed, dated October 17, 2007, among Nacional Financiera, S.N.C., Institución de Banca de Desarrollo, Monex Casa de Bolsa, S.A. de C.V., Grupo Financiero Monex and Comisíon Nacional Bancaria y de Valores (English translation), filed as an exhibit to our registration statement on Form F-1/A (No. 333-144771), filed with the SEC on October 17, 2007, is incorporated herein by reference.                                                                                                                                                       



140







|4.1  | Agreement for the use of infrastructure and installation of fiber optic cable on the highways between Puebla and Mexico, dated August 18, 1998, between Amaritel, S.A. de C.V. (the predecessor of Maxcom Telecomunicaciones, S.A. de C.V.) and Iusatel, S.A. de C.V., filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.                                                                                      
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.2  | Interconnection Agreement for long-distance services, dated January 22, 1999, between Amaritel and Teléfonos de México (Telmex) valid for an initial period of two years between February 1, 1999 and January 1, 2001, and in effect thereafter in accordance with article 42 of the Mexican Telecommunications law, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.                                        
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.3  | Local Interconnection Service Agreement, dated November 24, 1998, between Amaritel, S.A. de C.V. and Teléfonos de México, S.A. de C.V., filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.                                                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.4  | Amendment to Local Interconnection Service Agreement, dated February 25, 1999, between Amaritel, S.A. de C.V. and Teléfonos de México, S.A. de C.V., originally entered into on November 24, 1998, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.5  | Metropolitan Network Capacity Sale Agreement, dated April 28, 2000, between Maxcom Telecomunicaciones, S.A. de C.V. and Metro Net, S.A. de C.V., as amended on December 21, 2000, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 29, 2001, is incorporated herein by reference.                                                                                                                                                                                                 
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.6  | Telecommunications Service Agreement, dated November 15, 1999, between Maxcom and Teléfonos de México, S.A. de C.V. , filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.7  | Telecommunications Service Agreement, dated March 9, 1999, between Maxcom and Bestel S.A. de C.V., pursuant to which Bestel will provide long-distance and private call services to Maxcom, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.                                                                                                                                                                 
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.8  | Concession for the installation and operation of telecommunications services granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on December 20, 1996, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.9  | Amendment to Concession for the installation and operation of telecommunications services granted to Amaritel by the Secretary of Telecommunications and Transport on December 20, 1996, dated September 8, 1999, extending the coverage of such concession to include various additional municipalities of the State of Mexico, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.                            
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.10 | Amendment to Concession for the installation and operation of telecommunications services granted to Amaritel by the Secretary of Telecommunications and Transport on December 20, 1996, dated December 7, 1999, authorizing Maxcom to employ whatever technologies it deems appropriate in providing telecommunications services to various municipalities, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.11 | Amendment to Annex A and B of Concession for the installation and operation of telecommunications services granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on December 20, 1996, dated September 27, 2001, extending the coverage of such concession to include all of Mexico, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.                                       



141







|4.12 | Concession for a public telecommunications network in telecommunications regions 3, 5 and 8 granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on April 29, 1998, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.                                                                                                    
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.13 | Concession for the operation of point-to-multipoint microwave telecommunications services in Region 5 granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on April 23, 1998, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.14 | Concession for the operation of point-to-multipoint microwave telecommunications services in Region 3 granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on April 23, 1998, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.15 | Concession for the operation of point-to multipoint microwave telecommunications services in Region 8 granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on April 29, 1998, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.16 | Concessions for the nationwide operation of point-to-point microwave telecommunications services using five frequency bands in the 56 MHz bandwidth, each granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on June 4, 1998, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.                                        
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.17 | Concessions for the nationwide operation of point-to-point microwave telecommunications services using two frequency bands in the 100 MHz bandwidth, each granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on June 4, 1998, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.                                        
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.18 | Amendment to Concession for the operation of point-to-multipoint telecommunications services in Regions 3, 5, 8 granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on April 1, 1998, dated October 12, 1999, regarding the start date for the initiation of services, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.19 | Amendment to Concession for the installation and operation of telecommunications services granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on December 20, 1996, dated September 24, 1999 eliminating financial restrictions, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference.                                      
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.20 | Warrant Agreement, dated as of March 17, 2000, between Maxcom Telecomunicaciones, S.A. de C.V. and The Bank of New York, as warrant agent, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 29, 2001, is incorporated herein by reference.                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.21 | Dark Fiber Optic Purchase Agreement, dated as of August 13, 2002, between Maxcom Telecomunicaciones, S.A. de C.V. and Bestel S.A. de C.V., filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2003, is incorporated herein by reference.                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.22 | Transactional Lease Termination Agreement, dated as of May 20, 2003, among Maxcom Telecomunicaciones, S.A. de C.V. and Jacobo Zaga Romano, Jacobo Zaga Buzali, et.al., filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2003, is incorporated herein by reference.                                                                                                                                                         



142







|4.23 | Capacity Sale Agreement, dated as of October 15, 2003, between Maxcom Telecomunicaciones, S.A. de C.V. and Axtel, S.A. de C.V., filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 24, 2004, is incorporated herein by reference.                                                                                                                                                                                                                                                           
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.24 | Credit Agreement, dated April 28, 2004, by and among Banco Santander Mexicano, S.A., Institución de Banca Mútiple Grupo Financiero Santander Serfin, as lenders, and Maxcom, as borrower, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2005, is incorporated herein by reference.                                                                                                                                                                                                 
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.25 | Credit Agreement, dated April 13, 2005, by and among Ixe Banco, S.A., Institución de Banca Mútiple, Ixe Grupo Financiero., as lenders, and Maxcom, as borrower, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2005, is incorporated herein by reference.                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.26 | Amendment dated August 5, 2004 to Exhibit B of the Master Agreement to Supply Local Interconnection Services, dated February 25, 1999, between Maxcom and Telefonos de México, S.A. de C.V., filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2005, is incorporated herein by reference.                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.27 | Credit Agreement, dated April 13, 2005, by and among Ixe Banco, S.A., Institución de Banca Múltiple, Ixe Grupo Financiero, as lenders, and Maxcom, as borrower, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2006, is incorporated herein by reference.                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.28 | Credit Agreement, dated October 25, 2005, by and among Ixe Banco, S.A., Institución de Banca Múltiple, Ixe Grupo Financiero, as lenders, Maxcom, as borrower and Maxcom SF, S.A. de C.V. as joint and several obligor, and amendment dated December 13, 2005, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2006, is incorporated herein by reference.                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.29 | Credit Agreement, dated October 21, 2005, by and among Banco Mercantil del Norte, S.A., Institución de Banca Múltiple, Grupo Financiero Banorte, as lenders and Maxcom, as borrower, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2006, is incorporated herein by reference.                                                                                                                                                                                                      
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.30 | Irrevocable Trust Agreement, dated November 21, 2005, by and among Maxcom, as settlor, Banco Mercantil del Norte, S.A., Institución de Banca Múltiple, Grupo Financiero Banorte and Ixe Banco, S.A., Institución de Banca Múltiple, Ixe Grupo Financiero, as trust beneficiaries and HSBC México, S.A., Institución de Banca Múltiple, Grupo Financiero HSBC, Trust Division, as trustees, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2006, is incorporated herein by reference.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.31 | Minutes of Maxcom Shareholders Meeting dated August 31, 2005 approving the spin-off, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2006, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                      
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.32 | Stock Purchase Agreement, dated November 22, 2005, by and among Maxcom and Maxcom SF, S.A. de C.V., as sellers and Tiendas Comercial Mexicana, S.A. de C.V. and Controladora Comercial Mexicana, S.A. de C.V., as buyers, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2006, is incorporated herein by reference.                                                                                                                                                                 
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.33 | Supply and Installation Agreement of Video Through DSL (IPTV) System dated December 15, 2006 by and among Maxcom Telecomunicaciones, S.A. de C.V., Alcatel Bell N.V. and Alcatel México, S.A. de C.V., filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 26, 2007, is incorporated herein by reference.                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.34 | The First Executive Stock Option Plan, which includes a Trust Agreement, dated May 31, 1999, among Maxcom Telecomunicaciones, S.A. de C.V. and Banco Nacional de México (English translation) , filed as an exhibit to our registration statement on Form F-1/A (No. 333-144771), filed with the SEC on September 12, 2007, is incorporated herein by reference.                                                                                                                                                           



143







|4.35   | Second Executive Stock Option Plan, dated July 17, 2006 (English translation), filed as an exhibit to our registration statement on Form F-1/A (No. 333-144771), filed with the SEC on September 12, 2007, is incorporated herein by reference.
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                
|6.1 *  | Computation of earnings per share.                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                
|7.1 *  | Computation of ratio of earnings to fixed charges                                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                
|8.1 *  | Subsidiaries of the Registrant.                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                
|11.1   | Maxcom’s Code of Ethics adopted March 2006, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2006, is incorporated herein by reference.                                                                   
|       |                                                                                                                                                                                                                                                
|12.1 * | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a).                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                
|12.2 * | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a).                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                
|13.1 * | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350.                                                                                                                                                               
|       |                                                                                                                                                                                                                                                
|13.2 * | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.                                                                                                                                                               



*   Filed herewith.



144







GLOSSARY
OF TELECOMMUNICATIONS TERMS



|ADSL                   |  | (Asymmetrical Digital Subscriber Line) ADSL is a physical-layer protocol that supports up to 8 Mbps bandwidth downstream and up to 1 Mbps upstream. The asymmetrical aspect of ADSL technology makes it ideal for Internet browsing, video on demand, and remote LAN access. Users of these applications typically download more information than they send. ADSL also allows simultaneous voice communication by transmitting data signals outside of the voice frequency range.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Band                   |  | A range of frequencies between two defined limits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Bandwidth              |  | The relative range of analog frequencies or digital signals that can be passed through a transmission medium, such as glass fibers, without distortion. The greater the bandwidth, the greater the information carrying capacity. Bandwidth is measured in Hertz (analog) or Bits Per Second (digital).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Capacity               |  | Refers to the ability to transmit voice or data over telecommunications networks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Carrier                |  | A licensed provider of telecommunications transmission services by fiber, wire or radio.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Centrex service        |  | A business telephone service developed originally by Lucent Technologies which offers private branch exchange type features directly from the local telephone company central office, such as voicemail, call pick-up group, abbreviated dialing and multi-line hunting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Churn                  |  | Refers to customer line attrition and is measured as the percentage of disconnects from service relative to the total subscriber base over a given period of time.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Cofetel                |  | Comisión Federal de Telecomunicaciones,the Mexican Federal Telecommunications Commission.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Digital                |  | Describes a method of storing, processing and transmitting information through the use of distinct electronic or optical pulses that represent the binary digits 0 and 1. Digital transmission/switching technologies employ a sequence of discrete, distinct pulses to represent information, as opposed to the continuously variable analog signal.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|DSLAM                  |  | Digital Subscriber Line Access Multiplexer. A technology to concentrate traffic in ADSL implementations through time division multiplexing at the central office.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|E1                     |  | A digital telephony format that carries data at the rate of 2.048 Mbps (DS-1 level). E-1 is the European and Latin American version of North American T-1, though T-1 is 1.544 Mbps.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Fiber optic technology |  | Fiber optic systems use laser-generated light to transmit voice, data and video in digital format through ultra-thin strands of glass. Fiber optic systems are characterized by large circuit capacity, good sound quality, resistance to external signal interference and direct interface to digital switching equipment and digital microwave systems. A pair of fiber optic strands using advanced transmission technologies is capable of carrying multiple 2.5 or 10 Gbps communication streams. Because optical signals disperse over distance, they must be regenerated/amplified at sites located along the fiber optic cable. Fiber optic systems using earlier generation fiber require frequent intervals between regeneration/amplifier sites. Greater distances between regeneration/amplifier sites afforded by the use of advanced fiber generally translate into substantially lower installation and operating costs and fewer potential points of failure.



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|Fixed wireless local loop |  | A wireless local telephony service using the 3.4-3.7 GHz frequency band.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|FTTH                      |  | Fiber-to-the-home, reference to an all fiber-optic public telephone network design, where broadband services are delivered to the customer premises/network interface by fiber optic.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Gbps                      |  | Gigabits per second. A measurement of speed for digital signal transmission expressed in billions of bits per second (Gbps).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Gulf region               |  | 115 cities and towns in eleven states in eastern Mexico, which includes the cities of Puebla, Tampico, Veracruz, Reynosa, Cancun, Chetumal, Merida, Ciudad del Carmen, Campeche, Coatzacoalcos and Tuxtla Gutiérrez, among others.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Hertz                     |  | The unit measuring the frequency with which an alternating electromagnetic signal cycles through the zero-value state between lowest and highest states. One hertz(abbreviated Hz) equals one cycle per second. KHz (kilohertz) stands for thousands of hertz; MHz (megahertz) stands for millions of hertz and GHz (gigahertz) stands for billions of hertz.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|ISDN                      |  | Integrated Services Digital Network ISDN is an international standard that provides end-to-end digital connectivity to support a wide range of voice, data and video services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|IPTV                      |  | Internet Protocol Television is also called Internet Television or TV over IP and it refers to the transmission of television signals through the Internet using Internet Protocol.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Kbps                      |  | Kilobits per second, a measurement of speed for digital signal transmission expressed in thousands of bits per second.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Lambdas                   |  | Lambdas are used as the symbol for wavelength in light wave systems. Fiber optic systems may use multiple wavelengths of light, with each range of wavelengths appearing in a “window,” roughly corresponding to a color in the visible light spectrum.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|LAN                       |  | Local area network, a private data communications network linking a variety of data devices, such as computer terminals, personal computer terminals, personal computers and microcomputers, all housed in a defined building, plant or geographic area.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Microwave technology      |  | Although limited in capacity compared with fiber optic systems, digital microwave systems offer an effective and reliable means of transmitting lower volume and narrower bandwidths of voice, data and video signals over short and intermediate distances. Microwaves are very high frequency radio waves that can be reflected, focused and beamed in a line-of-sight transmission path. As a result of their electro-physical properties, microwaves can be used to transmit signals through the air, with relatively little power. To create a communications circuit, microwave signals are transmitted through a focusing antenna, received by an antenna at the next station in the network, then amplified and retransmitted. Because microwaves disperse as they travel through the air, this transmission process must be repeated at repeater stations, which consist of radio equipment, antennae and back-up power sources, located on average every 30 kilometers along the transmission route.



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|Mbps                                        |  | Mega Bits per second. A measurement of speed for digital signal transmission expressed in millions of bits per second (Mbps).                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Multi-line hunting                          |  | A value-added service that allows for multiple calls to be received with a single telephone number.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|PCS                                         |  | Personal Communications Services. PCS has come to represent two things: first, a digital wireless communications service operating over the 1.9 GHz band; and second, more generically, a wireless communications service utilizing a digital network that offers typical features such as voice, video and data applications, short messaging, voicemail, caller identification, call conferencing and call forwarding. Generic PCS suppliers promote this service on the ability of its features to be customized, or “bundled,” to the needs of the individual customers.
|                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Point- to-multipoint microwave transmission |  | A transmission using microwave technology by which a single signal goes from one origination point to many destination points.                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Point-to-point microwave transmission       |  | A transmission using microwave technology by which a signal goes from one point to another, usually connected by a dedicated transmission line.                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|POTS                                        |  | Plain Old Telephone Service. The basic service supplying standard single line telephones, telephone lines and access to the public switched network.                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Revenue Generated Unit (RGU)                |  | Represents an individual service subscriber who generates recurrent revenue for the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|SCT                                         |  | Secretaría de Comunicaciones y Transportes, the Mexican Ministry of Communications and Transportation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Switch                                      |  | A device that opens or closes circuits or selects the paths or circuits to be used for transmission of information. Switching is the process of interconnecting circuits to form a transmission path between users.                                                                                                                                                                                                                                                                                                                                                         
|                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Teledensity                                 |  | Teledensity is a measure of telephony service in a population. It is calculated by dividing the total subscriber base (number of lines in service) by the inhabitants and multiplying by 100. It is generally used as a comparative measure of network development. All teledensity figures are reported in subscribers per 100 inhabitants.                                                                                                                                                                                                                                
|                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Triple play services                        |  | Triple play services consist combination of voice, data, and video services offered as a bundled service for a price that is less than the price of the individual services acquired individually.                                                                                                                                                                                                                                                                                                                                                                          
|                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|VoIP                                        |  | Voice over Internet Protocol services consist in the technology that provides telephone companies with the ability to carry normal telephony-style voice over an Internet Protocol-based Internet with POTS-like functionality, reliability, and voice quality.                                                                                                                                                                                                                                                                                                             
|                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|VPN                                         |  | Virtual Private Network. A network design offering the appearance and functionality of a dedicated private network.                                                                                                                                                                                                                                                                                                                                                                                                                                                         



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|Web-hosting |  | A service performed by Internet service providers (also known as ISPs) and Internet access providers (also known as IAPs) consisting in the hosting of outside companies web pages to be displayed on the Internet.
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                                                                                    
|xDSL        |  | XDSL is a physical-layer protocol that supports bandwidth downstream and upstream.                                                                                                                                 



148







SIGNATURES



Pursuant to the requirements
of Section 12 of the Securities and Exchange Act of 1934, the registrant certifies that it meets all requirements for filing on
Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.



| | MAXCOM TELECOMUNICACIONES, S.A.B. DE C.V.
| | -----------------------------------------
| |                                          
| | By:                                      
| |                                          
| |                                          



DATE: May 15, 2013





149









EXHIBIT INDEX



|6.1  |  | Computation of earnings per share.                                                                                                                   
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                                      
|7.1  |  | Computation of ratio earnings to fixed charges                                                                                                       
|     |  |                                                                                                                                                      
|8.1  |  | Subsidiaries of the Registrant.                                                                                                                      
|     |  |                                                                                                                                                      
|12.1 |  | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a).                                                                             
|     |  |                                                                                                                                                      
|12.2 |  | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a).                                                                             
|     |  |                                                                                                                                                      
|13.1 |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|     |  |                                                                                                                                                      
|13.2 |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



150